decisions of the united states court of international trade

Decisions of the United StatesCourt of International Trade

�

Slip Op. 07–65

USEC INC. and UNITED STATES ENRICHMENT CORPORATION, Plain-tiffs, v. UNITED STATES, Defendant.

Before: WALLACH, JudgeCourt Nos.: 02–00112, 02–00113, 02–00114

PUBLIC VERSION

[Plaintiff ’s 56.2 Motion for Judgment on the Agency Record is Denied.]

Dated: May 4, 2007

Steptoe & Johnson LLP, (Eric C. Emerson, Sheldon E. Hochberg, and Evangeline D.Keenan) for Plaintiff USEC Inc. and United States Enrichment Corporation.

Pillsbury Winthrop Shaw Pittman LLP, (Nancy A. Fischer, Joshua DennisonFitzhugh, Sanjay J. Mullick and Stephan E. Becker) for Plaintiff-Intervenor Ad HocUtilities Group.

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Michael D.Panzera and Stephen C. Tosini, Attorneys, Commercial Litigation Branch, Civil Divi-sion, United States Department of Justice, for Defendant United States.

Fried, Frank, Harris, Shriver and Jacobson LLP, (Jay R. Kraemer and WilliamTaft) for Defendant-Intervenors Urenco, Inc., Urenco Ltd., Urenco DeutschlandGMBH, Urenco Capenhurst Ltd., and Urenco Nederland B.V.

OPINION

Wallach, Judge:

IIntroduction

Plaintiffs USEC Inc. and its wholly owned subsidiary UnitedStates Enrichment Corporation (collectively ‘‘USEC’’) challenge thefinal antidumping and countervailing duty determination of theUnited States Department of Commerce (‘‘the Department’’ or ‘‘Com-merce’’) with regard to low enriched uranium (‘‘LEU’’) from Ger-many, the Netherlands, and the United Kingdom. This opinion con-siders antidumping issues, both general and country-specific.

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The administrative determination under review is the final deter-mination by Commerce of sales at not less than fair value (‘‘LTFV’’)with respect to LEU from Germany, the Netherlands, and theUnited Kingdom, covering the period of investigation (‘‘POI’’) fromOctober 1, 1999 through September 30, 2000, set forth in Notice ofFinal Determinations of Sales at Not Less Than Fair Value: Low En-riched Uranium From the United Kingdom, Germany, and the Neth-erlands, 66 Fed. Reg. 65,886 (December 21, 2001) (‘‘Final Determina-tion’’).

This court exercises jurisdiction pursuant to 28 U.S.C. § 1581(c).

IIBackground

This case comes before the court after consolidated decisions be-fore a three-judge panel, the Court of Appeals for the Federal Circuit(‘‘Federal Circuit’’) and several remands to the Department of Com-merce. USEC v. United States, 259 F. Supp. 2d 1310 (CIT 2003)(‘‘USEC I’’); USEC v. United States, 281 F. Supp. 2d 1334 (CIT 2003)(‘‘USEC II’’); Eurodif S.A. v. United States, 411 F.3d 1355 (Fed. Cir.2005) (‘‘Eurodif I’’); Eurodif S.A. v. United States, 423 F.3d 1275(Fed. Cir. 2005) (‘‘Eurodif II’’); Eurodif S.A. v. United States, 414 F.Supp. 2d 1263 (CIT 2006) (‘‘Eurodif III’’); Eurodif S.A. v. UnitedStates, 431 F. Supp. 2d 1351 (CIT 2006) (‘‘Eurodif IV’’); and EurodifS.A. v. United States, 442 F. Supp. 2d 1367 (CIT 2006) (‘‘Eurodif V’’).A brief review follows.

On December 7, 2000, USEC petitioned Commerce to initiate anantidumping duty investigation on imports of LEU from Germany,the Netherlands, and the United Kingdom. In its Final Determina-tion, Commerce calculated zero percent margins for Germany andthe Netherlands and a de minimis margin for the United Kingdom.Final Determination, 66 Fed. Reg. at 65,888. The antidumping andcountervailing duty determination covered all LEU.1

Urenco Ltd. (‘‘Urenco’’), the Defendant-Intervenor in these cases,is a holding company located in the United Kingdom, which holds100 percent of the stock in Urenco Deutschland GmbH (‘‘UD’’), lo-cated in Germany; Urenco (Capenhurst) Ltd. (‘‘UCL’’), located in theUnited Kingdom; Urenco Nederland B.V. (‘‘UN’’), located in theNetherlands; and Urenco Investments, Inc. Urenco Ltd. ownsUrenco, Inc., a Delaware corporation that acts as Urenco Ltd.’s mar-keting arm and contracts representative in the United States,through Urenco Investments.

1 ‘‘LEU is enriched uranium hexafluoride (UF[6]) with a U<235> product assay of less than20 percent that has not been converted into another chemical form, such as UO[2], or fabri-cated into nuclear fuel assemblies, regardless of the means by which the LEU is produced(including LEU produced through the down-blending of highly enriched uranium).’’ Id. at65,887.

22 CUSTOMS BULLETIN AND DECISIONS, VOL. 41, NO. 32, AUGUST 1, 2007

The parties’ challenges are now ripe for adjudication.2 In thecourt’s original Scheduling Order, the three judge panel decided, andthe parties agreed, to address initially ‘‘general issues’’ affecting theDepartment’s threshold determinations, to be followed later by case-specific issues, such as ‘‘challenges to the Department of Commerce’scalculation results and methods.’’ Scheduling Order at 6 (August 5,2002). The threshold issues were decided by the three-judge paneland the Federal Circuit in USEC I, USEC II, Eurodif I, Eurodif II,Eurodif III, Eurodif IV and Eurodif V.

The Federal Circuit in both Eurodif I and Eurodif II held that theseparative work unit (‘‘SWU’’) contracts for uranium enrichmentthere at issue were contracts for services and therefore not subject tothe antidumping duty (‘‘AD’’) laws, and that 19 U.S.C. § 1673 unam-biguously applies to sales of goods and not services.3 Eurodif I, 411F.3d at 1361–62; Eurodif II, 423 F.3d at 1276. The court in Eurodif Iheld that there was no transfer of title or ownership of the LEU fromthe utility to the enricher since the utility retains title to the quan-tity of the enriched uranium that it supplies to the enricher. EurodifI, 411 F.3d at 1360. Pursuant to the court’s remand in Eurodif III,and as upheld by this court in Eurodif V, Commerce’s Final Resultsof Redetermination Pursuant to Court Remand (June 19, 2006) (‘‘Re-mand Redetermination’’) amended the scope language in the originalantidumping and countervailing duty order, thereby excluding ura-nium enrichment services contracts from the order. See Eurodif III,414 F. Supp. 2d at 1263; Eurodif V, 442 F. Supp. 2d at 1367; RemandRedetermination.4 Contracts for sales of LEU are unaffected by theprevious Eurodif cases, and remain within the scope of the anti-dumping duty order. At oral argument, the parties agreed that thecalculational issues related to enrichment services contracts in thesecase numbers are not mooted because Commerce, on remand in con-solidated court numbers 02–00219 and 02–00221, did not addressthese particular issues.

Familiarity with the courts’ prior opinions is presumed.

2 The arguments decided here were filed by the parties before the three-judge panel in2002–2003, prior to the Federal Circuit decisions in the Eurodif line of cases. Separate is-sues were assigned to each participant in that panel after general issues were decided.

3 A SWU contract is a contract for a ‘‘separative work unit,’’ a measurement of theamount of energy or effort required to separate a given quantity of feed uranium into LEUand depleted uranium at specified assays. In these SWU contracts, the enricher enrichesthe unenriched uranium and delivers LEU to the purchaser. See, e.g., Eurodif I, 411 F.3d at1357; USEC v. United States, Slip Op. 03–170, 2003 Ct. Int’l Trade LEXIS 170, at *7 n.8(December 22, 2003).

4 Following the Eurodif line of cases, contracts for the sale of LEU would still be includedwithin the ambit of the antidumping duty order. Urenco acknowledged at oral argumentthat a portion of the contract with [Utility A] involved a sale of LEU to a U.S. utility. Be-cause Commerce found a de minimis dumping margin for the United Kingdom, and a zeropercent margin for Germany and the Netherlands, this fact does not affect the calculationof Urenco’s dumping margin.

U.S. COURT OF INTERNATIONAL TRADE 23

IIIStandard of Review

In reviewing Commerce’s antidumping duty determinations, thecourt must sustain any determination, finding, or conclusion unlessit is unsupported by substantial evidence on the record or otherwisenot in accordance with law. 19 U.S.C. § 1516a(b)(1)(B); Fujitsu Gen.Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). ‘‘Substan-tial evidence means such relevant evidence as a reasonable mindmight accept as adequate to support a conclusion.’’ Consol. Edison v.NLRB, 305 U.S. 197, 229, 59 S. Ct. 206, 83 L. Ed. 126 (1938) (inter-nal citations omitted). The possibility of drawing two inconsistentconclusions from the same evidence does not mean that Commerce’sfindings are not supported by substantial evidence. Consolo v. Fed.Maritime Comm’n, 383 U.S. 607, 620, 86 S. Ct. 1018, 16 L. Ed. 131(1966).

When reviewing the Department’s construction of the antidump-ing statutes, the court first considers whether Congress has spokendirectly to the question at issue. Chevron U.S.A. v. Natural Res. Def.Council, Inc., 467 U.S. 837, 842–43, 104 S. Ct. 2778, 81 L. Ed. 2d 694(1984). If Congress has addressed the issue, then the court must fol-low the expressed intent of Congress. Id. However, if the issue hasnot been addressed by Congress, ‘‘the court does not simply imposeits own construction on the statute . . . [r]ather . . . the question forthe court is whether the agency’s answer is based on a permissibleconstruction of the statute.’’ Id. In its analysis, the court need notconclude that the agency’s construction is the only permissible con-struction, or even the reading the court would have reached, in orderto find the agency’s interpretation reasonable. Id. at 843 n.11 (citingFEC v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 39,102 S. Ct. 38, 70 L. Ed. 2d 23 (1981)). ‘‘[A] court must defer to anagency’s reasonable interpretation of a statute even if the courtmight have preferred another.’’ Koyo Seiko Co. v. United States, 36F.3d 1565, 1570 (Fed. Cir. 1994).

To ascertain whether Congress has spoken on an issue, the courtconsiders the plain text of the statute, canons of statutory construc-tion, structure of the statute, and legislative history. Timex V.I. v.United States, 157 F.3d 879, 882 (1998).

IVGeneral Issues Analysis Pertaining To All Three Case

Numbers

The first four issues discussed infra are common to each of USEC’schallenges with respect to LEU from Germany, the Netherlands, andthe United Kingdom. Country-specific issues are discussed in Sec-tion V infra. Case number 02–00112 concerns LEU from the United


Kingdom, 02–00113 LEU from Germany, and 02–00114 LEU fromthe Netherlands.

ACommerce Made a ‘‘Fair Comparison’’ Between Urenco’s U.S.

Export Price and Normal Value Based on Period ofInvestigation Sales Data

1Parties’ Arguments

USEC argues that Commerce failed to make a ‘‘fair comparison’’between Export Price (‘‘EP’’)5 and Normal Value (‘‘NV’’)6 because itsdate-of-sale methodology allegedly prevented it from doing so. Briefof USEC Inc. and United States Enrichment Corporation in Supportof Rule 56.2 Motion for Judgment on the Agency Record (‘‘USEC’sMotion’’) at 18, 24.7 USEC also claims that Commerce erred in calcu-lating Urenco’s EP by comparing, or ‘‘blending’’ POI data with a pre-POI sales contract, resulting in a higher price than the POI salealone and manipulating the LTFV calculation. Id. USEC states thatit raised its concerns as early as the initial petition, and that Com-merce has been silent on this issue. Id. at 12–13. USEC seeks aLTFV recalculation based only on the price of Urenco’s new U.S.sales during the POI, ‘‘net of any effect of pre-POI sales activity.’’ Id.at 14. Commerce may deviate from its standard methodology andpractice in making comparisons, USEC contends, if conforming tothem would not be fair, and if a deviation would more fully complywith the overarching purpose of the Act. Id. at 26.

USEC further argues that quantities of LEU ‘‘sold’’ during the POIunder the contracts between Urenco and [Utility B] (a U.S. utility)constitute a distinct sale separate from its pre-POI obligation beforethe contract renegotiations. USEC’s Motion at 16–17. USEC alsoclaims that when Urenco and its customers enter into a new oramended contract that includes new quantity commitments in addi-tion to pre-existing commitments, the new quantity commitments

5 Section 1677a(a) defines Export Price as:

the price at which the subject merchandise is first sold (or agreed to be sold) before thedate of importation by the producer or exporter of the subject merchandise outside ofthe United States to an unaffiliated purchaser in the United States or to an unaffili-ated purchaser for exportation to the United States . . . .

6 Normal Value is defined as:

[T]he price at which the foreign like product is first sold . . . for consumption in the ex-porting country, in the usual commercial quantities and in the ordinary course of tradeand, to the extent practicable, at the same level of trade as the export price or con-structed export price . . . .

19 U.S.C. § 1677b(a)(1)(B).7 All citations to Parties’ briefs refer to the briefs in court number 02–00112, unless oth-

erwise specified.


constitute a ‘distinct sale’ as a matter of law. Id. at 15.Defendant counters that ‘‘fair comparison’’ is not an additional re-

quirement, as the term generally describes the calculations contem-plated by the statute, and does not place an additional, independentrequirement upon Commerce. Defendant’s Response in Opposition tothe Motion for Judgment Upon the Agency Record Filed by USECInc. and United States Enrichment Corporation (‘‘Defendant’s Re-sponse’’) at 18, 20, 24. The Government also says that Commerce cor-rectly used the new price terms in Urenco’s renegotiated contracts asthe basis for calculating EP for all future deliveries by using Com-merce’s regular date-of-sale methodology to effectuate a fair com-parison. Id. at 9. Finally, Defendant argues that its normal method-ology best reflected commercial reality. Id. at 18, 20, 24.

Defendant also argues that Commerce’s determination to applythe new contract terms for all deliveries made pursuant to theamended contracts best reflects the commercial reality of the con-tractual renegotiations, as opposed to USEC’s proposed methodology.Id. at 26. Defendant further claims that treatment of transactionsafter the contract renegotiations as a ‘‘distinct sale’’ is contrary toagency practice and precedent. Id. at 25.

Defendant argues that USEC incorrectly focuses on individualquantities, rather than entire contracts, in making its argumentabout a ‘‘fair comparison.’’ Id. at 30–31. Defendant further arguesthat Commerce’s determination to apply the new contract terms forall deliveries made pursuant to the amended contracts ‘‘reflects thereality,’’ as opposed to USEC’s proposed methodology. Id. at 26. De-fendant notes that ‘‘specific changes in certain amendments intro-duced contractual terms that cannot be accounted for by USEC’s pro-posed methodology.’’ Id. at 27 (citing Memorandum from Cindy LaiRobinson, et al., Import Compliance Specialists, Office of AD/CVDEnforcement, U.S. Dep’t of Commerce, to Melissa Skinner, Dir., Officeof AD/CVD Enforcement, U.S. Dep’t of Commerce, Verification of theSales Responses of Urenco Ltd. et al., (October 4, 2001) (‘‘Sales Verifi-cation Report’’) at 5).

Urenco’s arguments parallel those made by Commerce.

2Discussion

aThe Department’s Chosen Date-of-Sale Methodology Is

Supported By Substantial Evidence and In Accordance WithLaw

The date of sale is an issue because Urenco renegotiated its SWUcontracts to two U.S. utility customers, [Utility B] and [Utility A]during the POI. USEC’s Motion at 11. USEC essentially argues thatCommerce should have based its methodology only on LEU delivered


pursuant to the renegotiated contract terms, and should not haveconsidered quantities delivered prior to the renegotiations. Id.

The ‘‘fair comparison’’ requirement is found in 19 U.S.C.§ 1677b(a), which provides that ‘‘[i]n determining under this titlewhether subject merchandise is being, or is likely to be, sold at lessthan fair value, a fair comparison shall be made between the exportprice [EP] or constructed export price [CEP] and normal value [NV].’’(Emphasis added). The statute describes NV as the price ‘‘reasonablycorresponding to the time of sale used to determine the [EP] or[CEP],’’ but does not specify the manner in which Commerce must de-termine the time of sale. 19 U.S.C. § 1677b(a)(1)(A). The Depart-ment’s date-of-sale regulation also provides that it:

[N]ormally will use the date of invoice . . . [h]owever, the Secre-tary may use a date other than the date of invoice if the Secre-tary is satisfied that a different date better reflects the date onwhich the exporter or producer establishes the material termsof sale.

19 C.F.R. § 351.401(i).In the preamble to this section, Commerce noted that due to the

‘‘unusual nature of long-term contracts . . . date of invoice normallywould not be an appropriate date of sale. . . .’’ Antidumping Duties;Countervailing Duties, 62 Fed. Reg. 27,296, 27,350 (May 19, 1997)(‘‘Preamble to Final Rules’’). Further, ‘‘[t]he date on which the mate-rial terms of sale are finally set would be the appropriate date of salefor such contracts.’’ Id. This has also been Commerce’s practice inother cases dealing with long-term contracts. See, e.g., CertainCorrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada: Preliminary Results of An-tidumping Duty Administrative Reviews and Recision of Reviews inPart, 65 Fed. Reg. 54,481, 54,485 (September 8, 2000) (‘‘For Dofasco’ssales made pursuant to long term contracts, we used date of contractas date of sale’’); Final Affirmative Countervailing Duty Determina-tion: Stainless Steel Sheet and Strip in Coils from the Republic of Ko-rea, 64 Fed. Reg. 30,664, 30,679 (June 8, 1999).

Even if material terms of sale are not changed, Commerce main-tains the authority to use a different date-of-sale methodology.Hornos Electricos De Venez., S.A. v. United States, 285 F. Supp. 2d1353, 1367 (CIT 2003). ‘‘The Department may exercise its discretionto rely on a date other than invoice date for the date of sale only if‘material terms’ are not subject to change between the proposed dateand the invoice date, or the agency provides a rational explanationas to why the alternative date ‘better reflects’ the date when ‘mate-rial terms’ are established.’’ SeAH Steel Corp. v. United States, 25CIT 133, 135 (2001) (citing Thai Pineapple Canning Indus. Corp.,Ltd. v. United States, 24 CIT 107, 109, 273 F.3d 1077 (2000), rev’d onother grounds). The terms renegotiated by Urenco included price and


quantity, terms determined to be material both by this court andCommerce. See, e.g., SeAH Steel Corp. v. United States, 25 CIT 133(price, quantity and payment terms material); Stainless Steel Sheetand Strip in Coils from the Republic of Korea, 64 Fed. Reg. 30,664,30,679 (1999) (price and quantity material).

Commerce has consistently held that a new date of sale is estab-lished for all future deliveries, governed by the amended terms,when parties renegotiate material terms of sale. See, e.g., LargeNewspaper Printing Presses and Components Thereof, Whether As-sembled or Unassembled, From Japan, 64 Fed. Reg. 55,243, 55,245(October 12, 1999); Certain Corrosion-Resistant Carbon Steel FlatProducts and Certain Cut-to-Length Carbon Steel Plate fromCanada, 64 Fed. Reg. 2173, 2178 (January 13, 1999) (‘‘Canada’’). Be-cause these terms are material based on court and agency precedent,USEC’s argument fails.

The party seeking to establish a date of sale other than invoicedate bears the burden of producing sufficient evidence demonstrat-ing that ‘‘another date . . . better reflects the date on which the ex-porter or producer establishes the material terms of sale.’’ VirajGroup, Ltd. v. United States, 343 F.3d 1371, 1377, n.1 (Fed. Cir.2003) (‘‘Viraj IV’’) (citing 19 C.F.R. § 351.401(i) (2003)); Allied Tube& Conduit Corp. v. United States, 25 CIT 23, 25, 132 F. Supp. 2d1087 (2001).

USEC cites Titanium Sponge from Japan, 54 Fed. Reg. 13,403(April 1, 1989) (‘‘Titanium’’) in support of its argument that Com-merce chose the wrong date of sale. Reply Brief of USEC Inc. andUnited States Enrichment Corporation (‘‘USEC’s Reply’’) at 4–5. InTitanium, a U.S. customer signed a minimum quantity contract andpurchased amounts above that quantity at the contract price; Com-merce determined the date of sale for the minimum quantity as thedate the contract was signed, and for all amounts sold over the mini-mum quantity the date the delivery instructions were issued wasdesignated the date of sale. Here, the issue is not a minimum quan-tity contract, but renegotiations of a contract. Titanium is accord-ingly distinguishable.

USEC also cites several cases in support of its argument thatCommerce must reconsider its methodology on remand and adoptUSEC’s proposed methodology. USEC’s Motion at 25–26 (citing BuddCo. v. United States, 14 CIT 595, 746 F. Supp. 1093 (1990) (‘‘BuddI’’); Budd Co. v. United States, 15 CIT 446, 447, 773 F. Supp. 1549,1550–51 (1991) (‘‘Budd II’’); Viraj Group, Ltd. v. United States, 25CIT 1017, 162 F. Supp. 2d 656 (2001) (‘‘Viraj I’’), after remand, 26CIT 290, 193 F. Supp. 2d 1331, 1338 (2002) (‘‘Viraj II’’), after remand,26 CIT 585, 206 F. Supp. 2d 1340 (2002) (‘‘Viraj III’’), rev’d, 343 F.3d1371 (Fed. Cir. 2003) (‘‘Viraj IV’’)). Its reliance is misplaced. The re-mands in those cases concerned different issues, or specifically de-


ferred to the Department’s discretion in choosing its own methodol-ogy. See Budd I; Budd II; Viraj I; Viraj II; Viraj III; Viraj IV.

Specifically, USEC relies on the Budd cases for the propositionthat for Commerce to effectuate a fair comparison, it must make acontemporaneous comparison of sales activity. USEC’s Motion at 10;see 19 U.S.C. § 1677b(a)(1)(A). While it is clear from precedent andthe statute that such comparisons are required, the statute does notmandate how Commerce must achieve that ‘‘apples with apples’’comparison. See Smith-Corona Group v. United States, 713 F.2d1568, 1578 (Fed. Cir. 1983). These cases that USEC cites stand forgeneral principles regarding fairness of implementation of thedumping laws; they are not supportive of USEC’s argument. SeeBudd I, 14 CIT at 595; Budd II, 15 CIT at 446; Smith-Corona Group,713 F.2d at 1578.

Budd I concerned a review of the Department’s circumstances ofsale adjustments to adjust the effect of currency discrepancies in ahyperinflationary economy.8 The circumstance of sale adjustmentenabled Commerce to ‘‘reconstruct a reference point whereby thesevalues are being compared with the U.S. price at the same point intime.’’ Budd I, 14 CIT at 605 (examining Amended Final Determina-tion of Sales at Less than Fair Value and Amended AntidumpingDuty Order; Tubeless Steel Disc Wheels From Brazil, 53 Fed. Reg.34,566 (September 7, 1988) (‘‘Brazil’’)). The court in Budd I upheldCommerce’s determination, deferring to its methodology, which useda circumstance of sale adjustment in order to effectuate a fair com-parison. Id. at 607. The court deferred to Commerce’s broad author-ity to ‘‘choose to effectuate the primary statutory purpose in favor offair determinations based on contemporaneous comparison.’’ Id. at604 (citing Smith-Corona Group, 713 F.2d at 1578). In the case subjudice, the record shows no manipulation or unfairness resultingfrom Commerce’s chosen date of sale methodology. To the contrary,Commerce’s decision to use its date of sale methodology reflects con-sideration of Urenco’s contractual renegotiations of material terms,which complies with the broad ‘‘fair comparison’’ requirement in thestatute. See 19 U.S.C. § 1677b(a). USEC interprets the ‘‘apples toapples’’ comparison in the statute too literally in arguing the meritsof its proposed methodology. See Smith-Corona Group, 713 F.2d at1578.

In Budd I, had Commerce not made a circumstance of sale adjust-ment within its discretion, it would have not made an accurate con-temporaneous comparison. However, the court noted that the under-lying Commerce determination in Budd I was ‘‘narrowly tailored to

8 The progenitor litigation to the Budd cases which originally remanded to Commercewas Borlem S.A. v. United States, 12 CIT 563 (1988).


the facts’’ because of a unique circumstance9 which does not exist inthis case.10 Budd I, 14 CIT at 599 (citing Brazil, 53 Fed. Reg. at34,567).

Defendant contests USEC’s reliance on the Viraj line of cases forthe broad proposition that a failure to explain why a methodology isa ‘‘fair comparison’’ is itself grounds for a remand. Defendant’s Re-sponse at 23. In Viraj II, the court remanded to Commerce to con-sider the most accurate methodology because a methodology may be‘‘unreasonable in a given case when a more accurate methodology isavailable and has been used in similar cases.’’ 26 CIT at 296 (quotingThai Pineapple, 273 F.3d at 1085). After three remands, the Depart-ment changed its methodology. On appeal, the Federal Circuit heldCommerce acted unlawfully when it utilized a date of paymentmethodology rather than using the date of sale, because Commerceis to utilize date of sale except when certain exceptions apply, whichwere not applicable in that case. Viraj IV, 343 F.3d at 1377. Here,the contract renegotiations qualify as an exception justifying Com-merce’s decision to use a date of sale methodology based on the con-tract renegotiation date. 19 U.S.C. § 1677b-1; Id. USEC argues thata provision in the suspension agreement in Certain Cut-to-LengthCarbon Steel Plate from South Africa, 62 Fed. Reg. 61,751, 61,752(November 19, 1997) proves Commerce is willing ‘‘to make exactly’’the type of calculation it advocates. USEC’s Motion at 23. At oral ar-gument, however, USEC was unable to point to any evidence sup-porting its desired result.11

In this case, Commerce extensively analyzed USEC’s proposedmethodology, concluding Commerce’s methodology ‘‘better reflectedcommercial reality.’’ Defendant’s Response at 24; Issues and DecisionMemorandum from Bernard T. Carreau, Deputy Assistant Sec’y forImport Administration, U.S. Dep’t of Commerce, to Faryar Shirzad,Assistant Sec’y for Import Administration, U.S. Dep’t of Commerce

9 The unique circumstance present in Budd I was Brazil’s hyperinflationary currency.Budd I, 14 CIT at 598. To account for the effects of Brazil’s unstable economy, Commerceconstructed foreign market value for six different one-month periods, using replacementcosts. ‘‘This practice allows the Department to view costs and prices contemporaneously inorder to avoid distortions caused by hyperinflation and achieve a fairer comparison.’’ Brazil,53 Fed. Reg. at 34,566. Commerce subsequently made a circumstance of sale adjustment toaccount for the devaluation of Brazil’s currency, ‘‘eliminat[ing] the artificial distortion ofvalue caused by the rapid depreciation of Brazil’s currency and . . . more accurately pro-vides a measure of whether dumping is occurring.’’ Id. Commerce’s usual methodology is tocalculate a single constructed value for the entire POI.

10 In Budd II, Plaintiff challenged the underlying reasoning of the same amended finaldetermination, and the court once again denied Plaintiff ’s claims. Budd II, 15 CIT at 448.Thus, Budd II is similarly unhelpful to Plaintiff.

11 The court asked Plaintiff whether there is evidence that ‘‘the Department has everbeen called upon to make the calculations USEC proposes.’’ Transcript of Oral Argument(‘‘Transcript’’) at 35. Plaintiff responded, ‘‘We don’t believe the Department has ever beenfaced with these specific facts before.’’ Id.


(December 13, 2001) (‘‘Decision Memo’’) cmt. 11. That Commerce didanalyze USEC’s methodology in detail distinguishes it from Viraj.Unlike Viraj, Commerce here made specific findings to support itsdetermination that there was no reason to deviate from its normalmethodology.12

USEC contends that Commerce had ‘‘an obligation’’ to make a con-temporaneous fair comparison by treating the renegotiated quanti-ties as a distinct sale. USEC’s Reply at 5. USEC argues that becausethe price of LEU had steadily declined in the years prior to the POI,by combining the higher prices with the lower prices, Commerce’s‘‘blending’’ skewed the calculations. However, the statute does notmandate that Commerce treat those quantities that way. 19 U.S.C.§ 1677b(a). ‘‘Obviously it would be inappropriate for Commerce tohave two different methodologies, one for when prices are rising, andanother for when prices are falling, so as to maximize dumping mar-gins.’’ Defendant’s Response at 29. As long as the Department’smethodology is a reasonable means of effectuating the statutory pur-pose of fairness and there is substantial evidence supporting its con-clusions, Commerce’s determination is correct. See CeramicaRegiomontana, S.A. v. United States, 810 F.2d 1137 (1987).

At verification, the Department found that the contracts had beenrenegotiated for a number of different reasons. Sales Verification Re-port at 5–6. Both in its Response and at oral argument, Commercestated that it would be mere speculation on its part to assume themotivations of parties in contract negotiations. Transcript at 73.Further, Commerce confirmed during verification that Urenco didnot view the [Utility A] contract as two separate sales, ‘‘one provid-ing for delivery of [X% of Utility A’s] requirements at the ‘old’ priceand the other providing for [a percentage] at the ‘new’ price.’’Urenco’s Rule 56.2 Response Brief in Opposition to USEC’s Motionfor Judgment upon the Agency Record Regarding Low Enriched Ura-nium from the United Kingdom (‘‘Urenco’s Response’’) at 29 (alter-ation in original); see Sales Verification Report at 7. Instead, ‘‘Urencoconsidered the blended price to cover one contract and one sale, i.e.,their sale to [Utility A] and that [Utility A] only paid one price.’’ Id.This point is well supported by the evidence in the record.

Under the amended and restated contract between Urenco and[Utility A], ‘‘Urenco agreed to provide [certain different contract con-sideration] as well. The commercial reality is that Urenco and [Util-ity A] substantially renegotiated the terms of the pre-POI contract

12 USEC acknowledged at oral argument that Urenco’s contracts were not manipulative,but argued that Commerce’s failure to address the issue leaves open the possibility in thefuture that manipulations can occur in other cases. Transcript at 14–15. Federal courts donot issue advisory opinions. See Flast v. Cohen, 392 U.S. 83, 95 88 S. Ct. 1942, 20 L. Ed. 2d947 (1968).


and emerged with a new, and very different, deal.’’ Urenco’s Re-sponse at 30 (emphasis in original).

USEC argues that these renegotiated terms in the new contractare mere form, and do not ‘‘really’’ govern future deliveries. USEC’sMotion at 18. Urenco responds that it renegotiated the terms of thepre-POI contract price in exchange for greater volume and less un-certainty, incorporating new terms in the already existing contract.Urenco’s Response at 30.

The Department’s decision to reject USEC’s ‘‘separate contract’’theory was correct and Commerce’s methodology is supported bysubstantial evidence and is in accordance with law. For the purposeof determining Urenco’s EP, the ‘‘date of contract’’ accurately re-flected the date on which Urenco established the material terms ofsale better than the date of invoice. 19 C.F.R. § 351.401(i); Preambleto Final Rules, 62 Fed. Reg. at 27,350. USEC has identified no previ-ous determination in which Commerce departed from its usualmethodology to disregard quantities delivered pursuant to a pre-existing contract simply because it was renegotiated.

As Urenco correctly states, ‘‘USEC’s proposed methodology wouldactually require the Department to eschew the required relianceupon verifiable facts and records in favor of a convoluted and artifi-cial mathematical analysis requiring substantial guess-work, specu-lation and assumption.’’ Urenco’s Response at 32. Commerce rightlyconcluded that USEC’s proposed methodology could not be accu-rately and consistently implemented. See Decision Memo at 22.

Based on the record evidence and longstanding methodology, Com-merce properly determined that USEC’s proposed methodologyskews the realities of long-term contracts and renegotiated terms. Inthe Notice of Preliminary Determination of Sales at Less Than FairValue: Low Enriched Uranium From the United Kingdom; Prelimi-nary Determinations of Sales at Not Less Than Fair Value: Low En-riched Uranium From Germany and the Netherlands; and Postpone-ment of Final Determinations, 66 Fed. Reg. 36,748, 36,751 (July 13,2001) (‘‘Preliminary Determination’’), Commerce considered USEC’sproposed methodology and determined that ‘‘we have considered theamended contract to constitute an entirely new sale, and have in-cluded in the dumping analysis all deliveries to date pursuant to theamended contract.’’ Preliminary Determination, 66 Fed. Reg. at36,751. ‘‘Therefore, in calculating export price, Commerce applied toall quantities delivered pursuant to these amended contracts thenew prices that had been agreed to by the parties pursuant to rene-gotiation.’’ Defendant’s Response at 16. In the Final Determination,Commerce again rejected USEC’s proposed ‘‘effective price’’ method-ology. See Final Determination, 66 Fed. Reg. at 65,888 (citing Deci-sion Memo cmt. 11). Commerce further explained its denial ofUSEC’s methodology, stating that:


[W]e disagree that these new prices and the new quantities canalways be viewed as sale separate from the existing contract.Rather, we find that the new prices and quantities are inte-grally related to the existing contract, which covers not justquantities and prices over extended periods but a host of othercommercially relevant factors. . . . The fact that a new oramended contract may include new quantity commitments inaddition to pre-existing quantity commitments does not meanthat the new quantity can be viewed as a distinct sale.

Decision Memo at 21–22 cmt. 11. In its Decision Memo, Commercedescribed various factors besides price and quantity that enteredinto the negotiations.13 Id.

Thus, Commerce’s decision to use a date of contract methodology,as opposed to its regulatory presumption in favor of date-of-invoiceas date of sale in calculating EP was supported by substantial evi-dence in the record, agency precedent, and court precedent. ApplyingChevron deference to Commerce’s chosen methodology, the courtfinds its decision to use the date of sale methodology based on the re-negotiated contract date was reasonable. Because Commerce pro-vided a rational explanation as to why the changes in the materialterms in Urenco’s renegotiated contracts merited a deviation from itsnormal date-of-sale analysis, it made a ‘‘fair comparison’’ in accor-dance with the statute. See Thai Pineapple, 24 CIT at 109.

bFair Comparison Is Not An Additional Statutory

Requirement

Plaintiffs in two Federal Circuit cases made an argument identicalto USEC’s concerning the alleged additional requirement of a faircomparison. Corus Staal BV v. United States, 395 F.3d 1343 (Fed.Cir. 2005); Timken Co. v. United States, 354 F.3d 1334 (Fed. Cir.2004). In rejecting the appellants’ claims, the Circuit both timesstated that the ‘‘fair comparison’’ requirement of ‘‘[section] 1677b(a)does not impose any requirements for calculating normal value be-yond those explicitly established in the statute and does not carryover to create additional limitations on the calculation of dumping

13 Other factors Commerce considered included ‘‘1) utilities’ concerns for security of sup-ply; 2) utilities’ concerns for a diversity of supply sources, 3) Urenco’s desire to maintainlong-term relationships with customers, 4) changes in utilities’ fuel procurement practices,and 5) the existence of price review clauses in contracts.’’ Decision Memo at 22, cmt. 11 (cit-ing Sales Verification Report at 5). Commerce also considered factors listed in the U.S. In-ternational Trade Commission’s Preliminary Determination, such as ‘‘discounts on pre-existing supply commitments, extended payment terms, the timing of the provision by theutilities of the converted uranium feedstock, and packaging and handling terms.’’ Id. (citingLow Enriched Uranium from France, Germany, the Netherlands, and the United Kingdom,Inv. 701–TA–409–412 (Preliminary) and 731–TA–909–912 (Preliminary), USITC Pub. 3388(January 2001)).


margins.’’ Corus Staal, 395 F.3d at 1348 (citing Timken, 354 F.3d at1344) (alteration in original). The implementing legislation for theUruguay Round Agreements Act supports this conclusion, stating‘‘[t]o achieve such a fair comparison, section 773 [§ 1677b] providesfor the selection and adjustment of normal value to avoid or adjustfor differences between sales which affect price comparability.’’ Uru-guay Round Agreements Act, Statement of Administrative Action,H.R. Doc. No. 103–826, at 822 (1994), reprinted in 1994U.S.C.C.A.N. 4040 (‘‘SAA’’) at 820.

Urenco argues that U.S. Steel Group v. United States, 25 CIT1293, 1296 n.7, 177 F. Supp. 2d 1325, 1329 n.7 (2001), directly con-tradicts USEC’s new methodology contention. See Urenco’s Responseat 14; USEC’s Motion at 18 et seq. Plaintiffs in U.S. Steel Group alsooffered an argument identical to Plaintiff ’s here. In U.S. SteelGroup, the court ‘‘[had] not found, nor [had] Plaintiffs presented, anyauthority supporting a construction of ‘fair comparison’ as a separateor freestanding requirement.’’ U.S. Steel Group, 25 CIT at 1296 n.7.Similarly, this court concludes based on a review of the record thatCommerce achieved a ‘fair comparison’ by complying with the re-quirements of the statute. Id.; Timken, 354 F.3d 1334 (finding that‘‘fair comparison’’ is not an additional requirement).

Urenco also argues that USEC incorrectly relies on Ipsco, Inc. v.United States, 13 CIT 402, 406, 714 F. Supp. 1211, 1215 (1989), forthe proposition that the court should remand when Commerce failsto make a ‘‘‘fair comparison,’ even where Commerce was otherwisefollowing its normal practices.’’ USEC’s Motion at 25; see alsoUrenco’s Response at 15. USEC indeed fails to recognize that Ipscowas reversed by the Federal Circuit, which held:

[Commerce’s] original methodology for calculating constructedvalue was a consistent and reasonable interpretation of section1677b(e). The trial court therefore also erred in substituting ‘itsown construction of a statutory provision for a reasonable inter-pretation made by the administrator of an agency.’

Ipsco, 965 F.2d 1056, 1061 (Fed. Cir. 1992) (citation omitted). Thecourt cannot interfere with Commerce’s interpretation of a statuteunless it is unreasonable or not otherwise in accordance with law.See U.H.F.C. Co. v. United States, 916 F.2d 689, 698 (Fed. Cir. 1990).In Int’l Union v. Brock, 816 F.2d 761, 765 (D.C. Cir. 1987), the D.C.Circuit Court of Appeals upheld the district court’s substitution of itsinterpretation for that of the agency because the court found theagency’s interpretation to be incorrect in that it conflicted with Con-gressional intent. Id. Specifically, the court found that ‘‘the practicaleffect [of] the Secretary’s interpretation . . . graphically demon-strates the absurdity of the agency’s construction. . . . It is well-understood that statutes must be construed so as to avoid illogical orunreasonable results.’’ Id. at 766. USEC argues that agency prece-


dent cannot ‘‘override a statutory directive’’ and cannot ‘‘be excused’’from administering the plain requirements of the Act, but does notpoint to anything specific that shows Commerce’s interpretation tobe so unreasonable or absurd for the court to replace its interpreta-tion for that of Commerce. U.H.F.C. Co., 916 F.2d at 698; see, e.g.,Chevron, 467 U.S. at 837; Zenith Radio Corp. v. United States, 437U.S. 443, 451, 57 L. Ed. 2d 337, 98 S. Ct. 2441 (1978) (finding theagency’s interpretation of the statute, entrusted by Congress to ad-minister, is to be upheld unless it is unreasonable).

Commerce has achieved a fair comparison by complying with itsown regulations. See 19 U.S.C. § 1677b(a). Because the substantialevidence in the record shows that Commerce complied with the stat-ute, the Department’s fair comparison was in accordance with law.

BUrenco’s U.S. Sales Were Properly Characterized By

Commerce As Export Price Sales1

Arguments

USEC argues that Commerce’s treatment of Urenco’s U.S. sales asEP sales, instead of undertaking a Constructed Export Price (‘‘CEP’’)analysis, is contrary to law and precedent as articulated in AK Steelv. United States, 226 F.3d 1361 (Fed. Cir. 2000), and should be re-manded to Commerce. USEC’s Motion at 28. USEC further arguesthat the level of sales activity by Urenco, Inc., Urenco Ltd.’s U.S. af-filiate, indicates that Commerce should have concluded that thesesales were made in the United States. Id. at 30. USEC cites AK Steelas support for the proposition that Commerce is obligated to deter-mine whether sales are to be classified as export price sales or con-structed export price sales based on all the record evidence, and notsimply the identity of the seller. Id. at 29. USEC essentially arguesthat Urenco, Inc.’s marketing and sales negotiation activities, aswell as the choice of law clause in the contract, directs Commerce tocalculate CEP pursuant to AK Steel. USEC also argues that aboilerplate provision which states that the contract ‘‘shall be con-strued’’ as a contract made in the U.S., demonstrates that U.S. EP isimproper. Id. at 33.

Urenco counters that the language was inserted into the contractin order to clarify that U.S. law would govern the contract becausethe contract was entered into outside the United States and most ofthe performance of the contract was in Europe. Urenco’s Response at42. Defendant argues that the Department properly concluded thatUrenco Ltd.’s U.S. sales were EP sales because the sales were con-tracted through Urenco Ltd., Urenco’s headquarters located inMarlow, U.K. Defendant’s Response at 32, 38.


2Discussion

Commerce calculates dumping margins by comparing either EP orCEP with NV of subject merchandise. 19 U.S.C. § 1673, 1677a. Incomparing EP, Commerce determines the price at which the subjectmerchandise is sold by a producer or exporter outside of the U.S. toan unaffiliated purchaser in the U.S. § 1677a(a). United States priceis calculated using either an EP methodology or a CEP methodology,depending on whether subject merchandise is sold to an affiliated orunaffiliated purchaser in the United States.14 § 1677a. Normally,Commerce relies on EP when the foreign exporter sells directly to anunrelated U.S. purchaser. CEP is used when the foreign exportermakes sales through a related party in the United States. See SharpCorp. v. United States, 63 F.3d 1092, 1093–94 (Fed. Cir. 1995).

In AK Steel the court held that use of the Department’s test toclassify a sale as an EP sale conflicted with the plain language of thestatute, where the sales contract was between a U.S. purchaser anda U.S. affiliate of the foreign producer/exporter. AK Steel, 226 F.3d at1368.15 The statutory distinction between the use of Export Price orConstructed Export Price rests on 1) where the sale takes place and2) whether the foreign producer or exporter and the U.S. importerare affiliated. Id. at 1369; 19 U.S.C. § 1677a(a)–(b). Although USECrelies heavily on AK Steel in its argument, it is not determinative ofthe outcome of this issue because under the circumstances of thiscase, EP clearly applies pursuant to the statute. See AK Steel, 226F.3d at 1369 (‘‘When the EP definition is read in conjunction with theCEP definition, the alleged ambiguity in the EP definition disap-pears.’’)

Urenco Ltd.’s records show that its sales were made outside of theU.S., and its questionnaire responses show that it controls its sub-

14 As noted above, the statute defines EP and CEP as follows:

(a) Export price

The term ‘export price’ means the price at which the subject merchandise is first sold(or agreed to be sold) before the date of importation by the producer or exporter of thesubject merchandise outside of the United States to an unaffiliated purchaser in theUnited States or to an unaffiliated purchaser for exportation to the United States . . . .

(b) Constructed export price

The term ‘constructed export price’ means the price at which the subject merchandiseis first sold (or agreed to be sold) in the United States before or after the date of impor-tation by or for the account of the producer or exporter of such merchandise or by aseller affiliated with the producer or exporter, to a purchaser not affiliated with theproducer or exporter . . . .

19 U.S.C. § 1677a(a)–(b).15 The AK Steel test involved a contract between a U.S. purchaser and a U.S. affiliate of

the foreign producer/exporter. In contrast, this case involves a U.S. purchaser and a foreignproducer/exporter, which clearly falls within the ambit of the statute.


sidiaries and affiliates and the selling procedures used. Defendant’sResponse at 38. ‘‘Throughout the Sales Verification Report, Com-merce found that all sales contracts involved the customer(s) andUrenco Ltd., not Urenco, Inc. Defendant’s Response at 40 (citingSales Verification Report at 8, 9, 12). Further, Commerce found thatonly Urenco Ltd. decided when to respond to Requests for Proposalsin connection with obtaining new business. Id. (relying on Sales Veri-fication Report at 6). A review of Urenco Ltd.’s ‘‘sales negotiation cor-respondence, contracts, invoices, shipping documents, records of pay-ment and movement expenses’’ in the U.S. market show that thesales were tied to Urenco Ltd. Id. at 41 (relying on Sales VerificationReport at 9). Commerce also confirmed that Urenco, Inc. sends con-tract proposals and defers to Urenco Ltd. for all business decisionsinvolving sales. Id. (citing Sales Verification Report at 31). Urencofurther explained that Urenco Ltd. ‘‘issues order confirmations, orga-nizes enrichment, arranges for shipment and arranges for holding ofproduct material at fabricators prior to book transfer to the cus-tomer. In contrast, Urenco, Inc. does not receive title to the importedLEU; nor does it perform the selling activities that would be indica-tive of CEP sales.’’ Urenco’s Response at 40.

At verification, Commerce analyzed Urenco Ltd.’s contracts anddetermined that the transactions were made with unaffiliated pur-chasers in the U.S., thereby supporting its decision to use EP insteadof CEP. Urenco, Inc., the U.S. affiliate, was not a party to the con-tracts at issue. Defendant’s Response at 44 (citing Antidumping Du-ties on Low Enriched Uranium From Germany: Response to SectionA of the Department’s Questionnaire, April 2, 2001 (‘‘UD Sect. A Re-sponse’’) Exhibit B–1, JA–2259. Though Urenco, Inc. carries out themarketing activities for Urenco Ltd., Urenco, Inc. is not the de factonegotiating entity for Urenco Ltd.’s contracts. The relevant factor inCommerce’s decision to use CEP or EP rests on whether an entity isactually empowered to enter into a contract. Urenco, Inc. being themarketing entity was not enough to warrant use of CEP.

USEC argues, both in its initial brief and in its Reply, that Com-merce determined where the contract was made and performedbased solely on who made the sale, rather than where the sale wasmade. USEC’s Motion at 29; USEC’s Reply at 13. USEC provides noevidence that Commerce disregarded record evidence in its analysis;its arguments are merely unsupported assertions. There is substan-tial evidence, beyond merely the name Urenco Ltd., which supportsCommerce’s determination that the contract was indeed made andenrichment performed outside of the United States. See Sales Verifi-cation Report at 31; UD Sect. A Response at A–27, Exhibit B–1, JA–2241.

USEC argues that Pohang Iron & Steel Co. v. United States, 24CIT 566, 571 (2000), stands for the proposition that the geographiclocation of the signing of a document is ‘‘irrelevant’’ to the CEP/EP


determination. USEC is incorrect. The court in Pohang noted thatthe location is not dispositive, but certainly not irrelevant. Id. USECis also incorrect in arguing that all contractual obligations are per-formed in the United States. See USEC’s Reply at 14. There is ampleevidence in the record showing Urenco Ltd. is the entity empoweredto enter into contracts, and that the contract here was, in fact, con-summated in the United Kingdom. Even though the contract statesit ‘‘shall be construed’’ as being made in the United States, thatstatement in itself is not sufficient to show it was in fact made in theU.S. That statement is simply a choice by the parties of which law isto apply, rather than a factual statement of the place of its signing.16

Because Commerce reasonably concluded that Urenco Ltd. in theUnited Kingdom was the contracting party, and that sales to U.S.customers were made by unaffiliated foreign producer/exporters, theAK Steel test is satisfied.17 See, e.g., UD Sect. A Response at A–13.Therefore, Commerce’s decision to calculate Urenco Ltd.’s servicesusing EP, instead of CEP, is supported by substantial evidence andin accordance with law.

CCommerce’s Calculation of Urenco’s Normal Value is

Supported By Substantial Evidence and in Accordancewith Law

1Commerce Properly Excluded Urenco Ltd.’s LossesResulting From Futures Hedging Contracts in its

Calculation of Normal Value Because They Were NotRelated to Manufacturing the Subject Merchandise

USEC argues that Commerce incorrectly excluded certain futurescontracts losses from its LTFV calculation of NV because Urenco didnot provide evidence that these losses were not associated with itsmanufacturing activities. USEC’s Motion at 34–35. USEC claims

16 Choice of law clauses ‘‘protect the expectations of the parties . . . regardless of wherethe case is brought for litigation.’’ THE LAW OF TRANSNATIONAL BUSINESS TRANSACTIONS § 4.20(Ved P. Nanda & Ralph B. Lake, eds., 2002); see Phillips Petroleum v. Shutts, 472 U.S. 797,822, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985) (expectations of the parties is important whenconsidering fairness); RESTATEMENT 2ND OF CONFLICT OF LAWS § 187 cmt. e (1988) (factors toconsider are the ‘‘protection of justified expectations’’); see also Edelmann v. Chase Manhat-tan Bank, N.A., 861 F.2d 1291, 1301 n.63 (1st Cir. 1988); but cf. Broad v. Rockwell Int’lCorp., 642 F.2d 929, 946 (5th Cir. 1981) (holding that in the event that parties are from dif-ferent states, and the subject matter is national in scope, and where the contract states ‘‘itshall be deemed to be made under the laws of the state of New York, and for all purposesconstrued in accordance with laws of said State,’’ New York law applies as the parties’ choiceof law.)

17 The second factor in determining where the sale was made in the United States iswhether title passes. AK Steel, 226 F.3d at 1372. During the enrichment process, the utilityretains title to the quantity of unenriched uranium that it supplies to Urenco. See Eurodif I,411 F.3d at 1362; Eurodif II, 423 F.3d at 1278.


that Commerce’s determination was speculative, because it assumedthat such losses occurred outside the POI since they exceeded pay-ments received in a particular one-month period, and because it as-sumed that the losses were associated with selling activities, as op-posed to manufacturing. Id.

Defendant counters that Commerce properly excluded UrencoLtd.’s losses resulting from futures hedging contracts in its calcula-tions of manufacturing costs because they were not related to manu-facturing the subject merchandise. Defendant’s Response at 51 (cit-ing Decision Memo cmt. 17). Defendant cites ample evidence in therecord which supports Commerce’s determination that such foreignexchange losses related to Urenco Ltd.’s general selling activitiesand sales contracts entered into outside the POI, and not to its pro-duction activity.18

Urenco claims that two of the Department’s findings specificallysupport its determination that the LTFV margin calculation shouldnot reflect losses on currency futures contracts. Urenco’s Response at43. First, Urenco identifies the Department’s finding that it is ‘‘rea-sonable to conclude that Urenco’s hedging contracts, as well as thecorresponding loss, are related to the activity being hedged, i.e.,Urenco’s sales.’’ Urenco’s Response at 43–44 (citing Decision Memo at32–33 (citing Urenco 2000 Annual Report at 17)). Second, it points tothe Department’s conclusion that such losses were related to ‘‘[sales]contracts other than those entered into during the POI’’ based on evi-dence showing the amount of cash involved in Urenco’s futures con-tracts far exceeded the revenue from Urenco’s POI sales. Id.

There is no statute which speaks directly to adjustments reflectingcurrency hedging losses, and the statute concerning calculation ofconstructed value (‘‘CV’’) offers only general guidance. See 19 U.S.C.§ 1677b. Based on this general provision, Commerce determinedthat such losses were not related to production, which are the costsused to calculate CV. See 19 U.S.C. § 1677b(e)(1);19 see also Notice ofFinal Determination of Sales at Less Than Fair Value: Steel WireRod from Trinidad & Tobago, 63 Fed. Reg. 9177, 9181–82 (February

18 See, e.g., Decision Memo cmt. 17; UD Sect. A Response at A–1, A–47; Memorandumfrom Ernest Gziryan, Accountant, U.S. Dep’t of Commerce, to Neal Halper, Dir., Office of Ac-counting, U.S. Dep’t of Commerce, regarding Cost of Production and Constructed Value Cal-culation Adjustments for the Final Determination - [for Urenco Ltd. and UrencoDeutschland] (December 13, 2001) (‘‘Cost Calculation Memo’’) at 4–5.

19 19 U.S.C. 1677b(e)(1) states, in pertinent part:

[T]he constructed value of imported merchandise shall be an amount equal to the sumof –

(1) the cost of materials and fabrication or other processing of any kind employed inproducing the merchandise, during a period which would ordinarily permit the produc-tion of the merchandise in the ordinary course of business . . . .

19 U.S.C. § 1677b(e)(1).


24, 1998) (the Department includes currency losses related to manu-facturing operations in its calculations, but excludes those related tosales transaction). Defendant explains:

In the case of currency hedging, there is not necessarily a directlink to the specific activity generating the gains and losses. Incontrast, foreign exchange gains and losses directly associatedwith cash transactions involving purchases or sales are easilytraced to a company’s accounts payable and accounts receivableactivity.

Defendant’s Response at 53. Commerce also reviewed Urenco’s Fis-cal Year 2000 report, which indicated that its business is largelytransacted in U.S. dollars, making Urenco continually exposed tothat currency. Decision Memo cmt. 17; see also UD Sect. A Responseat A–1, 47. Supporting that interpretation, Urenco’s currency hedg-ing contract was for the sale of U.S. dollars. Id. In making its deter-mination, Commerce analyzed Urenco’s contractual sales informa-tion and audited financial statements, ultimately finding that thecurrency hedging contracts were related to sales occurring outsidethe POI. Defendant’s Response at 53–54. Because the contracts werenot directly tied to production activity, Commerce reasonably ex-cluded them from the calculation of CV.

Commerce’s treatment of Urenco’s losses attributable to currencyhedging contracts is supported by court and agency precedent. Thecourt and Commerce have previously rejected adjustments related toforeign currency hedging. See, e.g., Thyssen Stahl AG v. UnitedStates, 19 CIT 605, 614–15, 886 F. Supp. 23, 31 (1995), aff ’d withoutop., Thyssen Stahl AG v. AK Steel Corp., 155 F.3d 574 (Fed. Cir.1998); Certain Welded Carbon Steel Pipes and Tubes from Thailand,65 Fed. Reg. 60,910 (October 13, 2000) (no hedging contract was di-rectly tied to the sale in question, therefore the Department did notallow exchange rate loss adjustment). Further, ‘‘[t]o claim a circum-stance of sale adjustment to foreign market value, expenses must berelated to the sales of the products under investigation, rather thanto sales generally.’’ LMI - La Metalli Industriale, S.p.A. v. UnitedStates, 13 CIT 305, 307, 712 F. Supp. 959 (1989) (citing Ipsco, Inc. v.United States, 12 CIT 384, 687 F. Supp. 633, 642 (1988)). The Fed-eral Circuit, reviewing this court’s affirmation of Commerce’s re-mand determination, upheld the Department’s requirement that adirect relationship exist between currency hedging costs and sales inthe foreign market of the subject products under investigation.LMI-La Metalli Industriale, S.p.A. v. United States, 912 F.2d 455,458 (citing Ipsco, Inc., 687 F. Supp. at 642) (requiring that each ex-pense be related to sales of the products under investigation)). Addi-tional support comes from the legislative history, which notes thatcircumstances of sale adjustments should be permitted if they arereasonably identifiable, quantifiable, and directly related to thesales under consideration. See H. R. Rep. No. 96–317 at 76 (1979).


Thus, Commerce’s conclusion that Urenco’s foreign exchangelosses were associated with sales transactions is supported by sub-stantial evidence, and is in accordance with law.

2Commerce’s Exclusion of the Cost of Urenco’s [Input]

Contract Purchases Was Reasonable

USEC argues that Commerce departed from agency practice byexcluding from its calculation of normal value, Urenco’s purchases of[input] from its [Country A] supplier, [Supplier A]. USEC’s Motion at39. USEC further argues that Commerce erred because Urenco didnot physically identify its quantity of [input] obtained from its sup-plier, thereby failing to differentiate it from [self-produced input] forU.S. utilities. Id. at 40–42 (citing Notice of Final Results of Anti-dumping Duty Administrative Review: Certain Pasta From Italy, 65Fed. Reg. 7349 (February 14, 2000) (‘‘Pasta’’). USEC argues thatPasta requires that ‘‘the respondent must be able to demonstratethat the same physical product it purchased was sold and deliveredto a given market.’’ Id. at 40. Further, USEC claims that becauseUrenco has not established a ‘‘direct line’’ between purchased and re-sold [input], the cost of the ‘‘commingled’’ purchased [input] shouldhave been included in the calculation of NV, consistent with Pasta.Id. at 42 (citing Pasta, 65 Fed. Reg. at 7,356).

The second argument put forth by USEC is that Urenco paid toomuch for its [input], and that therefore it could have also paid toolittle for [another form of processing by Supplier A].20 Id. at 47. De-fendant counters that Commerce’s exclusion of the cost of Urenco’s[input] purchases from [Supplier A], a [Country A] supplier of LEU,was reasonable because the [input] acquired from [Supplier A] wassegregated and was never sold in the United States. Defendant’s Re-sponse at 56; Transcript at 77. Defendant also disagrees withUSEC’s argument that Commerce has broken with past practice.Commerce was consistent with past practice, Defendant argues, be-cause the purchased [input] was not subject merchandise, but waspurchased from a third country. See Defendant’s Response at 56, 59;Pasta, 65 Fed. Reg. at 7,356 cmt. 10. Defendant argues that Pastastands for the proposition that Commerce’s practice is to either in-clude the cost of merchandise from an unaffiliated supplier that can-not be separately identified in the weighted-average cost of manufac-ture, or to exclude such costs if the product ‘‘can be directly tied tospecific sales by the respondent.’’ Defendant’s Response at 59.

Defendant further argues that Commerce based its determinationon three findings, the first being that suppliers of [input] do not

20 [The other form of processing is a process rendered upon] depleted uranium after theoriginal enrichment process. USEC’s Motion at 5,45–6.


qualify as respondents in this proceeding, so their products were ex-cluded from the analysis. Id. at 58 (citing Cost Calculation Memo at4). Second, Commerce found that the nuclear industry keeps suchtight control over the location of nuclear material that the productscontinued to be separately identifiable. Id. Third, it says, there wasno evidence of unfair pricing. Id. at 59.

Urenco argued that the [input] purchased from [Supplier A] is soldafter enrichment to facilities not located in the United States.Urenco’s Response at 45. At oral argument, Urenco acknowledgedthat a portion of the [Utility A] contract provides for the sale of lowenriched uranium.21 Transcript at 80. Urenco says that Commerceproperly excluded [input] that Urenco acquired from an unaffiliatedsupplier and did not sell to customers in the United States becausesuch contracts were not relevant to the cost of production calcula-tion, precisely because the purchased product never reached theUnited States. Urenco’s Response at 45–46. Both Defendant andUrenco agree that there was a sale of merchandise in the [Utility A]contract. Transcript at 71 (citing UD Sect. A Response).

Pursuant to statute, Commerce is required to exclude purchasedproduct from the cost of manufacturing. See 19 U.S.C. § 1677b(e)(1).The statute directs Commerce to calculate the costs of materials toproduce the subject merchandise, not the cost to purchase it. Thispractice is supported by the Federal Circuit. Thai Pineapple Pub. Co.v. United States, 187 F.3d 1362, 1366 (Fed. Cir. 1999).22

As a result of Eurodif precedent, enrichment services SWU con-tracts are not included within the scope of the Final Determination.See Eurodif I–V. The Federal Circuit’s decision in Eurodif II that theSWU contracts were contracts for services, and not goods, hinged onthe court’s decision that title under the SWU contracts at issuenever passed from the utility to the enricher at any point in the en-richment process. Eurodif I, 411 F.3d at 1362; Eurodif II, 423 F.3d at1278. Pursuant to the court’s remand in Eurodif IV, and as upheld inEurodif V, Commerce’s Remand Redetermination contained lan-guage amending the scope of Commerce’s Final Determination to ex-clude SWU enrichment services contracts. Eurodif IV, 431 F. Supp.2d 1351; Eurodif V, 442 F. Supp. 2d 1367; Remand Redetermination.The new scope language essentially created a carve-out from the Fi-nal Determination, while sales of LEU covered by SWU contractsmay remain within the scope of the Final Determination. RemandRedetermination at 2; Eurodif V, 442 F. Supp. 2d 1367. Therefore,under Eurodif precedent, and as conceded by Urenco at oral argu-

21 Applying the Eurodif precedent, this particular LEU would remain within the scope ofthe Final Determination.

22 This court in Eurodif IV noted that Commerce did not address the issue of affiliatedparty feed purchase claims because it found that the remand instructions did not direct itopen the record on this issue. Eurodif IV, 431 F. Supp. 2d at 1354.


ment, its sales of LEU to utilities in the United States could still beincluded in the scope of the antidumping duty order. See Eurodif V,442 F. Supp. 2d 1367; Transcript at 80.

Here, a portion of the contract with Utility A for the productionand sale of LEU involved unenriched uranium originally purchasedby Urenco, after which title and ownership were transferred fromUrenco to [Utility A], resulting in a sale of goods under Eurodif I andEurodif II’s logic. Transcript at 80; see Eurodif I, 411 F.3d at 1362;Eurodif II, 423 F.3d at 1278. Therefore, it is still within the scope ofthe Final Determination. As clarified at oral argument, no portion ofthe [input] that Urenco purchased from its [Country A] supplier en-tered the United States.

Because the Remand Redetermination in the Eurodif line of casesdid not directly pertain to the issues sub judice, Commerce’s modifi-cation of the scope of the Final Determination to exclude uraniumenrichment contracts, as upheld by this court in Eurodif V, is not au-tomatically binding here.23 Since Commerce’s Final Determination issustained in this case, it is unnecessary to apply the Eurodif prece-dent because no antidumping duty order is in place. Commercemade findings of zero and de minimis margins, no order was made;accordingly, no further action by this court or Commerce is neces-sary.

Plaintiff mistakenly argues that Urenco’s failure to physically dif-ferentiate its purchased [input from its self-produced input for theU.S. utilities’] automatically means that all of the resulting LEU isincluded within the scope of the antidumping duty order. The [input]that has not physically entered the United States cannot be subjectto the antidumping duty order. USEC misconstrues Pasta as requir-ing a direct physical tracking of the subject product; a tangible seg-regation of LEU is not realistic, and such an interpretation was re-jected by the Federal Circuit in Eurodif I and Eurodif II. Eurodif IV,431 F. Supp. 2d at 1354 (‘‘[I]t is correct that a utility may not receivethe LEU that was enriched from the exact unenriched uranium thatit delivered to the enricher . . . the Federal Circuit has already con-sidered this issue and held that the facts/arguments USEC raises inthis respect are of no moment.’’) (citations omitted).24 Commerce didin fact confirm that the sales of the purchased product could betraced directly to the Supplier with record evidence. Defendant’s Re-sponse at 61 (citing Cost Calculation Memo at 4); see also Sales Veri-fication Report at 4. As verified by Commerce, and as Urenco re-ported, ‘‘Urenco does not physically segregate uranium, except for[input from the Country A supplier].’’ See Antidumping Duties on

23 The Remand Redetermination disposed of consolidated case numbers 02–00119 and02–00221.

24 We are not dealing with widgets here, which can be physically marked and separated,but with LEU, which is in tracked in quantities under SWU contracts.


Low Enriched Uranium From the United Kingdom, the Netherlandsand Germany: Response to Section D of the Department’s Supplemen-tal Questionnaire (May 30, 2001) (‘‘UD Supp. Sect. D Response’’) at31); Sales Verification Report, Tab F, Exhibit 29. That evidence ismore than is required by Commerce. Pasta does not require physicalseparation; it only requires a relation between the cost and the sub-ject merchandise sufficient to demonstrate that the supplier is theconsidered a respondent. Defendant’s Response at 62; Pasta, 65 Fed.Reg. at 7356–57.

Additionally, in Pasta, Commerce did not impose a requirement ofphysical identity of the tangible product; it required that the respon-dent separately identify the product ‘‘for sales purposes’’ in order totrack it. See Pasta, 65 Fed. Reg. at 7356. As USEC acknowledged inits Commerce Brief, Urenco does ‘‘track this [purchased input] onpaper . . . and segregate[s] its own production from [the purchasedinput].’’ Urenco’s Response at 47 (citing USEC’s Commerce CaseBrief at 107–08). LEU, by its nature, is not physically or tangiblyidentifiable.

USEC also argues that ‘‘Urenco paid too much to its unaffiliatedsupplier for [input], so that it could also pay too little for [anotherform of processing].’’ Urenco’s Response at 48 (citing USEC’s Motionat 47). At verification, Commerce confirmed Urenco’s documentationof the transactions, concluding: ‘‘the prices paid by Urenco for each ofthese services/products are based on terms specified in a long-termcontract agreed to several years prior to the POI and between unaf-filiated parties.’’ Decision Memo at 29 (citing Cost Calculation Memoat 4). The evidence Commerce evaluated at verification confirmedthat the price Urenco paid for [input] from its unaffiliated supplierduring the POI was set in a contract amendment [signed] prior tothe POI. Urenco’s Response at 48 (citing Sales Verification ReportTab F, Exhibit 29). Therefore, Commerce concluded that ‘‘[w]e havefound no evidence or incentive for the parties to have negotiated un-fair prices for [the other form of processing] at the expense of [input]purchases.’’ Cost Calculation Memo at 4 (alteration in original).25

Some of the [input] purchased by Urenco Ltd. were provided in theUnited Kingdom, but no portion of the [purchased input] entered theUnited States. It was proper for Commerce to exclude [input] pur-chases that did not enter the country precisely because that particu-lar merchandise had no contact with the United States. USEC’s ar-

25 Urenco also points out that:

USEC makes no allegation that the SWU price was above the market price at thetime of this [contract amendment]. Rather, the sole foundation for USEC’s claim isan amendment signed during the POI. But the POI amendment did not alter theprice set in the earlier amendment for deliveries in the POI; rather, it sets a [differ-ent contract term] for deliveries in [a later period].

Urenco’s Response at 49.


gument that because Urenco failed to physically identify thepurchased [input], it is deemed subject to the antidumping duty law,is unavailing. Whether the [input] from [Supplier A] is a sale or aservice, Commerce’s exclusion of such [input] from the cost of pro-duction is supported by substantial evidence and in accordance withlaw.

3The Department Correctly Calculated Urenco’s Constructed

Value Profit Rate

USEC argues that Commerce miscalculated Urenco’s ConstructedValue (‘‘CV’’) profit rate by making inconsistent adjustments.USEC’s Motion at 49. Specifically, by allowing Urenco’s depreciationexpenses, but by excluding its other cost items, USEC argues thatCommerce understated Urenco’s CV profit rate. Id. ‘‘Commerce in-creased the depreciation expense contained in the cost of productionfor each Urenco subsidiary to reflect the fact that Urenco had under-stated the depreciation stemming from its purchases of capital as-sets from affiliated parties.’’ Id. Therefore, USEC argues, this issuemust be remanded to Commerce for further explanation as to whyCommerce failed to make parallel adjustments. Id. at 52.

Urenco responds that the Department correctly calculated the CVrate on a company-wide basis.26 Urenco’s Response at 49. ‘‘In short,the Department accepted the obvious conclusion that if [UrencoLtd.’s] total expenses had been higher, [Urenco Ltd.’s] company-wideprofit would have been lower.’’ Id. at 50 (citing Decision Memo at 28).Urenco also argues that the Department properly included in the CVcalculation all of the expenses included in the calculation of UrencoLtd.’s cost of production, and USEC’s argument proposing the exclu-sion of such expenses is barred because it failed to raise this argu-ment during the administrative proceedings. Id. at 51.

Defendant says that Commerce’s adjustment to Urenco’s cost ofproduction by increasing its depreciation expenses on its capital as-sets (specifically, centrifuges), was in accordance with 19 U.S.C.§ 1677b(e) and agency practice.27 Defendant argues that USECseeks a remand to Commerce to consider other adjustments notraised at the administrative level. Id. Therefore, it says, USEC hasfailed to exhaust its administrative remedies in its request for Com-merce to make further adjustments to its CV profit calculation. De-fendant’s Response at 66, 71.

26 Calculations were made based on Urenco Ltd.’s audited financial statements. Com-merce determined the amount of profit by deducting total expenses in 2000 from total turn-over in 2000. See Cost Calculation Memo, Attachment 6 (citing Urenco Ltd. Cost Verifica-tion Exhibit 11, p.26, JA–9291).

27 This is not disputed by USEC.


Pursuant to statute, CV is calculated by combining the 1) cost ofmaterials and fabrication; 2) sales, general, and administrative ex-penses and profit; and 3) costs for containers and coverings. 19U.S.C. § 1677b(e). The cost of materials is calculated by a valuationof the assets used to produce the merchandise, and by depreciatingthe value of those assets over a number of years. § 1677b(f)(1)(A);Defendant’s Response at 67. Because Commerce found that Urencohad purchased some of those assets from affiliated parties for lessthan the cost of production, Defendant explains that Commerce usedthe ‘‘cost of production of those assets as a surrogate for the marketprice.’’ Defendant’s Response at 67; see § 1677b(f)(2). Commerce ex-plained why it used a surrogate value for market price in its Deci-sion Memo, stating it may ‘‘disregard transactions between affiliatedpersons if those transactions do not fairly reflect the value in themarket under consideration. . . . Because Urenco claimed it was notpossible to provide market prices for inputs received by each com-pany from the other Urenco Group companies, we used the COP todetermine the market value of the affiliated inputs.’’ Defendant’s Re-sponse at 67–68 (quoting Decision Memo at 27).

‘‘Commerce then increased the depreciation expense contained inthe COP for each Urenco subsidiary to reflect the value of capital as-sets purchased from affiliated parties.’’ Id. at 68 (quoting DecisionMemo at 28). Explaining its rationale for its increase, Commercestated that

[t]he transfer price, however, did not include all . . . costs or netfinancing expenses, both of which are a components (sic) of thecost of production. Therefore, for the final determination, we in-creased depreciation expenses associated with those fixed as-sets.

Id. (quoting Decision Memo at 28). Defendant further argues that be-cause Commerce could not calculate Urenco’s NV using home mar-ket sales, it likewise could not rely on Urenco’s sales for the calcula-tion of CV profit pursuant to 19 U.S.C. § 1677b(e)(2)(A). Id. at 69.Because actual data was unavailable, in accordance with section1677b(e)(2)(B), Commerce looked to ‘‘actual amounts incurred andrealized . . . for selling, general, and administrative expenses . . . inthe same general category of products as the subject merchandise.’’19 U.S.C. 1677b(e)(2)(B). Thus, Commerce arrived at a ‘‘globalprofit’’ figure, derived from Urenco’s sales and divided it by a ‘‘globalCOP,’’ made up of all merchandise used in Urenco’s profit calcula-tions. Defendant’s Response at 69. ‘‘The result was . . . a percentageof profit, which it then applied to Urenco’s reported COP of subjectmerchandise . . . [which] was then added to Urenco’s COP to deter-mine Urenco’s CV.’’ Id.

In its Preliminary Determination, Commerce did not initially takeinto consideration Urenco’s depreciation expenses. See PreliminaryDetermination, 66 Fed. Reg. 36,748. Urenco argued that if Com-


merce imputes depreciation expenses on its capital assets (namely,centrifuges), Commerce should likewise reduce Urenco’s subsidiar-ies’ profits with a depreciation offset, because the increase in costswould necessarily reduce profits. Defendant’s Response at 70. Com-merce replied that it was not required to make such an offset, butfound that it was reasonable. Id.; Decision Memo at 28.

USEC does not dispute any of Commece’s depreciation offsets, butargues that Commerce should have made other adjustments to itsCV profit calculation since it already made two. USEC’s Motion at50–51. Defendant responds that USEC failed to raise this argumentin its Comments on the Preliminary Determination before Commerceand is therefore barred from raising it here.28 Defendant’s Responseat 71 (citing Sandvik Steel Co. v. United States, 164 F.3d 596, 599(Fed. Cir. 1998)). USEC counters that it could not possibly have prof-fered an argument at the agency level about adjustments that wereyet to be made in the Final Determination. USEC’s Reply at 24.

Defendant’s ‘‘exhaustion of administrative remedies’’ argumentneed not be addressed.29 Commerce has reasonably explained howand why it arrived at Urenco’s profit rate, with the increased depre-ciation adjustment, based on the evidence contained in the record.Commerce’s calculations and explanation are in conformity with 19U.S.C. § 1677b(e) and (f). Even though Commerce’s interpretation of§ 1677b(e) and (f) was not required, it was a permissible and reason-able construction of the statute. See Chevron, 467 U.S. at 843 n.11.

VCountry Specific Issues

A Low Enriched Uranium From the United Kingdom,Court No. 02–00112

1Commerce Properly Allocated a Proportion of Urenco’sCentrifuge Losses as Period Costs in its Calculation of

Constructed Value

USEC argues that not including the entire amount of UCL’s cen-trifuge failure losses in Commerce’s cost of production calculation be-cause they were deemed not to be within the POI, was incorrect andruns contrary to agency precedent. USEC’s Motion at 52–53. USEC

28 Defendant additionally argues that it would be ‘‘unreasonable’’ for Commerce to recon-sider on remand only the new adjustments proposed by USEC, without opening the recordfor other interested parties to comment. Defendant’s Response at 73. Defendant states thatsuch a remand is contrary to the underlying policies of the exhaustion doctrine. Id. at 74(citing Unemployment Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143, 155, 67 S.Ct. 245, 91 L. Ed. 2d 136 (1946).

29 Defendant’s exhaustion argument is without merit because Plaintiff was not in a posi-tion to argue for additional adjustments to the CV profit calculation at the administrativelevel. Because Commerce adjusted Urenco’s CV profit rate in the Final Determination, theonly opportunity for Plaintiff to contest that adjustment was before this court.


also objects to Commerce’s treatment of such losses as period costs,because UCL reported these losses as ‘‘materials costs’’ and becausethe loss did not relate to the ‘‘company as a whole’’ since the equip-ment was used for other activities besides the production of LEU. Id.at 54; see 19 U.S.C. 1677b(f)(1)(A) (directing agencies to follow aproducer/exporter’s accounting records when they are in accordancewith generally accepted accounting principles (‘‘GAAP’’)). Therefore,USEC asks that the Final Determination be remanded to Commerceto include the full amount of UCL’s centrifuge losses as manufactur-ing costs. Id. at 55.

Additionally, USEC argues that Commerce ‘‘gave no rationale fordeparting from Urenco’s normal accounting treatment for this loss,’’and that any arguments by Defendant or Urenco now ‘‘constitute[ ]post hoc rationalization by counsel.’’ USEC’s Reply at 25–26. In par-ticular, USEC refers to Defendant’s argument in its Response that itapplied its normal methodology of treating maintenance costs asmanufacturing period costs, and that centrifuge replacement ben-efits production throughout the fiscal year. Id. at 26. Therefore,USEC claims, in the absence of an explanation, Commerce shouldhave applied Urenco’s classification of the expense.30 Id. at 27.

USEC relies on Steel From Korea as support for its argument thatthe replacement of Urenco’s centrifuges ‘‘to restore Urenco to full ca-pacity’’ is more comparable to plant expansion expenses (a manufac-turing cost), rather than ‘‘certain maintenance expenses’’ for replace-ments. Id.; see Final Determinations of Sales at Less Than FairValue: Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant Car-bon Steel Flat Products, and Certain Cut-to-Length Carbon SteelPlate from Korea, 58 Fed. Reg. 37,176, 37,187 (July 9, 1993) (‘‘SteelFrom Korea’’). In Steel From Korea, Commerce treated replacementexpenses as period costs and included them in the cost of productionto the extent allocable within the POI. Id. USEC has not cited anydirect support for the proposition that a large replacement costtransforms into a POI related expense on par with expansion.

UCL listed the costs associated with its centrifuge failures as ‘‘ma-terials costs applicable solely to production during the POI,’’ butCommerce characterized it as a period cost in the Final Determina-tion, allocating it proportionately throughout the year incurred. De-fendant’s Response at 75, 82 (citing Decision Memo cmt. 23). Com-merce’s decision to allocate the cost commensurate to the portionthat fell within the POI is consistent with agency practice and withthe evidence provided by Urenco in the record. Id. at 76 (citing Deci-sion Memo cmt. 23); see, e.g., Steel From Korea, 58 Fed. Reg. at37,187 (stating that production assets, such as rollers and parts,

30 USEC argues in both of its briefs, concerning all other issues in this case, that Com-merce should depart from Urenco’s established accounting procedures.


‘‘benefit production throughout the fiscal year’’ and are treated as pe-riod costs). Specifically, Commerce found that centrifuge failure isnot ‘‘unusual in nature’’ or ‘‘infrequent in occurrence’’ and Urenco’s fi-nancial statements expensed the entire amount associated with loss.Decision Memo cmt. 23. Pursuant to statute, Commerce is directedto follow a respondent’s normal accounting methodology when it isconsistent with accounting standards and is reasonable. 19 U.S.C.§ 1677b(f)(1)(A).31

Another reason for Commerce’s allocation of period costs, Defen-dant argues, is that they benefit production throughout the fiscalyear, unlike material costs. Defendant’s Response at 77; see also No-tice of Final Determination of Sales at Less Than Fair Value: FreshAtlantic Salmon from Chile, 63 Fed. Reg. 31,411, 31,436 (June 9,1998) (By spreading period costs proportionately over the POI, eachproduct absorbs proportionate amount of period costs; period costsare more related to an accounting period and manufacturing costsare more related to a particular product).

Because UCL’s primary business and ‘‘the source of virtually all itsrevenue, is the enrichment of uranium using centrifuges,’’ it was rea-sonable for Commerce to attribute a proportionate amount of thelosses over the POI.32 Urenco’s Response at 53; Decision Memo cmt.23. USEC offers no support for its proposition that the statute pro-hibits Commerce from allocating period costs throughout the POI,and ignores Commerce’s longstanding practice of treating replace-ment expenses as period costs. Indeed, the statute does not speak di-rectly to this matter. USEC cites U.S. Steel Group v. United States,22 CIT 104, 105–06, 998 F. Supp. 1151 (1998) in support of its argu-ment that ‘‘Commerce’s rationale for allocating only a portion ofthese losses to POI production was its conclusion that these lossesconstituted a ‘period cost.’ ’’ USEC’s Motion at 53. While U.S. Steelheld that ‘‘G&A [general and administrative] expenses are those ex-penses which relate to the activities of the company as a wholerather than to production process,’’ it does not address the attribu-tion of losses over the POI in Commerce’s cost of production and con-structed value calculation, which is the crux of Plaintiff ’s argument.

31 Commerce shall normally calculate costs according to the following criteria:

[B]ased on the records of the exporter or producer of the merchandise if such recordsare kept in accordance with the generally accepted accounting principles of the ex-porting country (or the producing country, where appropriate) and reasonably reflectthe costs associated with the production and sale of the merchandise . . . .

19 U.S.C. § 1677b(f)(1)(A).32 In Commerce’s Decision Memo, it held that Urenco’s centrifuge failure was not ‘‘un-

usual in nature’’ or ‘‘highly abnormal’’ because it is clearly related to the production of LEUsince centrifuges are critical to the production of uranium. Decision Memo cmt. 23 (citingAntidumping Duties on Low Enriched Uranium From the United Kingdom: Response to Sec-tion A of the Department’s Questionnaire (April 2, 2001) (‘‘Urenco Sect. A Response’’), ExhibitD–14 at 3, and Exhibit D–16 at 5).


U.S. Steel, 22 CIT at 106 (citing Rautaruukki Oy v. United States, 19CIT 438, 444 (1995)). U.S. Steel does not mention period costs, butdescribes G&A expenses, not applicable here. Because Urenco allo-cated period costs over the fiscal year in which they were incurred,the costs were properly allocated over the nine-month portion of thePOI that overlapped with the fiscal year.

Additionally, USEC’s argument to include the entire cost of the re-placement centrifuges would ‘‘unreasonably attribute replacementcosts’’ to LEU sold outside the POI. Defendant’s Response at 82. Con-sistent with the rationale in Steel From Korea and section1677b(f)(1)(A), centrifuges are a production asset and costs of replac-ing them benefit production throughout the year; thus, Commerce’streatment of Urenco’s centrifuge losses as period costs and allocatingthe cost of replacement centrifuges is supported by substantial evi-dence and is in accordance with law.

2The Department Correctly Excluded Urenco’s Research and

Development Costs from its CV Determination

USEC argues that Commerce miscalculated UCL’s research anddevelopment (‘‘R&D’’) rate by excluding costs associated with theNew Products Division (‘‘NPD’’). USEC’s Motion at 55. USEC furtherargues that Commerce’s allegedly erroneous conclusion that suchR&D projects generated revenue, led it to wrongly exclude thesecosts in its calculation of Urenco’s cost of production. Id. USECclaims that 19 U.S.C. § 1677b(f)(1)(B) requires Commerce to includea share of R&D expenses where a respondent incurs expenses onnew products, therefore, Commerce understated Urenco’s cost of pro-ducing LEU by excluding non-recurring expenses rather than re-flecting them in the calculation of cost of production. USEC’s Motionat 57; USEC’s Reply at 30.

At oral argument, USEC clarified its argument, stating that be-cause there were ‘‘no discernible sales’’ from the NPD as per Com-merce’s verification report, the only way for the NPD to be financedwas internally, that is, through profit from Urenco’s uranium enrich-ment division. Transcript at 52. Because the R&D on new productshad no sales, USEC added, its expenses should be attributable togeneral R&D. Id. at 54.

Defendant counters that Commerce’s determination to excludeR&D expenses pertaining to Urenco’s NPD from its calculation of CVwas correct because they related to the development and productionof non-subject merchandise. Defendant’s Response at 83 (citing Deci-sion Memo cmt. 19). Urenco adds that USEC’s reliance on§ 1677b(f)(1)(B) is misplaced, given that the statute and preambleaddress whether a nonrecurring expense should be expensed in theyear in which the expense occurred, as opposed to amortizing it infuture years. Urenco’s Response at 57.


USEC cites previous final determinations made by the Depart-ment in support of its arguments; however, they support Defendant’sarguments under the particular facts of this case. Specifically,longstanding agency practice has been to include R&D expenses inits CV calculation only when the benefits of R&D could not be tied toa specific product or production activity. See Final Determination ofSales at Less Than Fair Value: Fresh Cut Roses From Colombia, 60Fed. Reg. 6,980, 7,016 (February 6, 1995) (including R&D expensesin CV calculation after finding no conclusive evidence that the R&Drelated specifically to production). The underlying factual basis forthat determination was directly contrary to the agency’s record inthis case. Here, Commerce has found no evidence demonstrating anylinkage between Urenco’s NPD activities and its LEU production.

Section 1677b(f)(1)(A) directs Commerce to calculate CV based onthe records of the producer/exporter, when in accordance with GAAPof the exporting or producing country. Addressing USEC’s claim thatthe statute directs Commerce to include the R&D expenses, Urencocorrectly explains, ‘‘[n]othing in the language quoted from the Pre-amble to Proposed Rules indicates that the Department’s policy is toinclude in the cost of producing subject merchandise a company’sR&D costs unrelated to subject merchandise.’’ Urenco’s Response at57. In the Preamble to Proposed Rules, it states, ‘‘because of the fact-specific nature of determinations involving nonrecurring costs, theDepartment has not drafted any regulations to implement section773(f)(1)(B) of the Act [19 U.S.C. § 1677b(f)(1)(B)].’’ AntidumpingDuties; Countervailing Duties, 61 Fed. Reg. 7,308, 7,342 (February27, 1996) (‘‘Preamble to Proposed Rules’’); see also Preamble to FinalRules, 62 Fed. Reg. at 27,362. The subsection of the statute is a gen-eral provision, guiding Commerce to calculate costs ‘‘based on therecords of the exporter or producer of the merchandise, if suchrecords are kept in accordance with the [GAAP] of the exportingcountry . . . .’’ 19 U.S.C. § 1677b(f)(1)(A). Subsection (B) only notesthat ‘‘[c]osts shall be adjusted appropriately for these nonrecurringcosts that benefit current or future production . . . .’’ § 1677b(f)(1)(B).Section (f) contains more specific instructions on calculating sales atless than the cost of production and CV in sections (b) and (e), and isnot the basis by which Commerce makes its calculations.

Upon review of Urenco’s records, Commerce found ‘‘that [UrencoLtd.’s] New Products Division is dedicated to the development andproduction of two major products unrelated to the enrichment pro-cess,’’ and the work conducted there ‘‘provide no intrinsic benefits toUrenco’s enrichment activities.’’ Defendant’s Response at 85 (citingDecision Memo cmt. 19); Urenco’s Response at 54. USEC argues thatR&D expenses may only be excluded from the CV calculation whenthe respondent is producing and selling the non-subject merchan-dise. The reasoning is that generation of revenues is the determina-tive factor in whether to include expenses in the CV calculation.


USEC’s Motion at 57 (citing Notice of Final Determination of Salesat Less Than Fair Value: Static Random Access Memory Semicoduc-tors From the Republic of Korea, 63 Fed. Reg. 8,934, 8,939–41 (Feb-ruary 23, 1998) (‘‘SRAMS’’)). USEC’s Motion at 57.

SRAMS is, however, distinguishable from the case at bar. InSRAMS, Commerce determined that because there was ‘‘significantcross-fertilization’’ between R&D work and the subject merchandise,all R&D expenses should be allocated over all products. SRAMS, 63Fed. Reg. at 8,939. Here, USEC has not alleged, and the Departmenthas not identified, any potential cross-fertilization between Urenco’sNPD and its LEU enrichment.

The Department arrived at the same conclusion in Dynamic Ran-dom Access Memory Semiconductors of One Megabit or Above Fromthe Republic of Korea; Final Results of Antidumping Duty Adminis-trative Review, 61 Fed. Reg. 20,216, 20,218 (May 6, 1996)(‘‘DRAMS’’), finding that R&D costs cannot be included in the CVcalculation in the absence of ‘‘any record evidence of R&D cross-fertilization.’’ Id. (citing Micron Tech. v. United States, 19 CIT 829,832, 893 F. Supp. 21 (1995), aff ’d, 117 F.3d 1386 (Fed. Cir. 1997)).Urenco explains its NPD as ‘‘a laser process to enrich and depletenon-radioactive materials such as gadolinium and it develops pro-cesses for the manufacture of power storage flywheels; it performsno activity that benefits Urenco’s uranium enrichment activities.’’33

Urenco’s Response at 54–55.In Micron Tech., the court rejected Commerce’s inclusion of R&D

costs unrelated to the subject merchandise in its calculation of CV ofthe subject merchandise. Micron Tech., 19 CIT at 831. The court heldthat expenses associated with R&D not directly related to the sub-ject merchandise, and which do not provide an ‘‘intrinsic benefit’’ tothe subject merchandise, should not be included in the cost of pro-duction. Id. at 832. Because substantial evidence did not support adetermination that the subject merchandise intrinsically benefittedfrom R&D for non-subject merchandise, the court directed Com-merce to amend its calculation in its Final Determination. Id.; seeFinal Determination of Sales at Less than Fair Value: Dynamic Ran-dom Access Memory Semiconductors of One Megabit or Above Fromthe Republic of Korea, 58 Fed. Reg. 15,467, 15,472 (March 23, 1993)(‘‘DRAMS 1993’’). A review of agency precedent shows that Com-merce has consistently used the ‘‘intrinsic benefit’’ analysis as therelevant test, and not the method which USEC advocates. See, e.g.,SRAMS, 63 Fed. Reg. 8,934; DRAMS, 61 Fed. Reg. 20,216l; DRAMS1993, 58 Fed. Reg. 15,467.

Because the Department determined, based on the record, thatUCL’s R&D associated with its NPD provided no ‘‘intrinsic benefits

33 Urenco corroborated this statement at oral argument.


to Urenco’s enrichment activities,’’ its determination is supported bysubstantial evidence and is in accordance with law.

BLow Enriched Uranium From Germany, Court No.

02–0011334

Commerce Properly Accepted Urenco Deutschland’s TailsDisposal Costs Estimate

By failing to adjust Urenco Deutschland’s (‘‘UD’’) accrued expensefor tails disposal, USEC argues that Commerce understated its costof production and committed ‘‘legal error.’’ USEC’s Motion at 53.USEC argues that the Supplier, [Supplier A’s] price was ‘‘an appro-priate ‘benchmark’ for determining whether UD’s tails accrual wasreasonable,’’ and that Commerce’s determination that the small dif-ference between the [Supplier A] price and UD’s estimates provedUD was reasonable is unsupported by substantial evidence. USEC’sReply at 25–26.

Defendant argues that UD’s valuation of disposal costs for de-pleted uranium tails was reasonable and Commerce’s use of thesefigures is supported by the record. Defendant’s Response at 75.

Germany’s GAAP require that producers of LEU include in theirannual expenses, in the normal course of business, costs associatedwith tails disposal, even if the tails were not disposed. 19 U.S.C.§ 1677b(f)(1)(A); Defendant’s Response at 76. UD estimated its costsbecause it kept its tails in a storage facility. Id. Its estimates werebased on an official quote provided by [Supplier B, an unaffiliatedthird party]. Id. at 77 (relying on UD Supp. Sect. D Response at 16,Exhibit 8, at 10–11). Urenco disputes USEC’s assertion that Urenco’saccrual for the expenses of tails disposal is based only on ‘‘Urenco’sinternal estimates,’’ rather, it argues it is based on ‘‘information fromother sources, including cost proposals from unaffiliated third par-ties.’’ Urenco’s Response at 5; USEC’s Motion at 4. Commerce re-viewed UD’s estimates at verification and found them to be reason-able estimations of disposal costs. See Memorandum from Ernest Z.Gziryan, Accountant, U.S. Dep’t of Commerce, to Neal M. Halper,Dir., Office of Accounting, U.S. Dep’t of Commerce, regarding Anti-dumping Duty Investigation of Low Enriched Uranium from Ger-many: Verification of the Cost of Production and Constructed ValueData submitted by [UD] (September 25, 2001) (‘‘Germany Cost Verif.Report’’) at 16–18. Commerce based its determination on meetingswith nuclear enrichment scientists, reviewing Urenco’s cost determi-nation report, and by comparing UD’s 2000 tails estimate with thecost of sending tails for [another form of processing to Supplier A],

34 All briefs and appendices containing the administrative record cited in this sectionwere filed in case number 02–00113.


its unaffiliated supplier. Defendant’s Response at 78–79 (citing Ger-many Cost Verif. Report at 16–18, and UD Supp. Sect. D Response at16–18, Exhibit 9, at 12).

Defendant agrees with USEC that the Department does not usu-ally rely on estimates for its calculations. See Stainless Steel WireRod from Spain; Final Results of Antidumping Duty AdministrativeReview, 66 Fed. Reg. 10,988 cmt. 2 (February 21, 2001); DecisionMemo cmt. 2. But, it says, here USEC fails to distinguish that UD’sfigures were merely estimates of future disposal and costs of futureexpenditures, and it was not possible to provide a concrete price fordisposal. Defendant’s Response at 82.

USEC also argues that Commerce erred by not choosing thehigher [Supplier B] estimate for tails disposal. USEC’s Motion at 56.Commerce was aware of the higher tails disposal cost estimate from[Supplier B in Year A], however, Defendant argues that UD ex-plained that it was not a formal quote received by UD, but priced asa ‘‘testing market’’ because [Supplier B] did not have the capacity in[Year A] to dispose of all of its tails as it did in [Year B]. Defendant’sResponse at 80 (citing UD Supp. Sect. D Response, Exhibit 8, at 6);Germany Cost Verif. Report at 18. In its Decision Memo incorporatedin the Final Determination, Commerce dismissed UD’s claims thatadopting its own estimates would distort Commerce’s methodology,noting that ‘‘[w]e found no reason to believe that these assumptionsrepresent a manipulation of Urenco’s financial reporting.’’ DecisionMemo at 29. Commerce also explained that under German GAAP, acompany can choose a method of computing which permits deprecia-tion of expenses. Id. cmt. 21. Urenco argued before Commerce thatits accounting should not be followed because the particular methodwas selected for the benefit of a tax advantage under German law.Id. However, Commerce ultimately determined that because UD hadused a ‘‘widely accepted depreciation method’’ approved by UD’s ownauditors and prepared in accordance with German GAAP, it was rea-sonable to accept UD’s reported costs. Id.

For the purpose of calculating CV, 19 U.S.C. § 1677b(f)(1)(A)states that costs shall normally be calculated on the basis of therecords of the exporter or producer, when in accordance with GAAP.Id. Based upon the reasons explained above, and because UD’s ac-counting records are annually audited, Commerce found the differ-ence between the [Supplier A] figure and UD’s estimate was minimalenough not to question the reasonableness of UD’s estimates. Ger-many Cost Verif. Report at 17. Therefore, Commerce properly deter-mined that UD’s records satisfied the statute and were appropriateto use in its CV calculations. Decision Memo cmt. 16.

USEC further argues that UD understated its tails accrual by 6.9percent, based on a comparison between UD’s tails disposal provi-sion with the cost of [another form of processing] performed by [Sup-plier A, a Country A company]. USEC’s Motion at 55. USEC also as-


serts that the Department ‘‘implicitly concluded’’ that [Supplier A’s]price was the ‘‘market rate.’’ Id. In its verification report, Commercestates that the Department made this comparison only ‘‘to assess thereasonable of UD’s year 2000 tails provision.’’ Germany Cost Verif.Report at 16. Urenco also says the price of [Supplier A’s other form ofprocessing] was only for a limited quantity. UD Supp. Sect. D Re-sponse, Exhibit 8 at 9. Because Commerce investigated UD’s esti-mates at verification, and there is no evidence presented to supportUSEC’s claims of ‘‘manipulation,’’ USEC’s argument fails.

USEC also claims that because UD’s tails disposal costs were ad-justed by Commerce, UNL’s costs should have likewise beenchanged. USEC’s Motion at 54. However, Urenco argues, and asCommerce noted at verification, ‘‘each company uses different costassumptions for the final disposal of tails and different timing of fu-ture payments, which affects discounting of the charges to presentvalue. . . . As such, it may not be appropriate to simply compare eachUrenco company’s final disposal cost of tails . . . .’’ Germany CostVerif. Report at 17–18. Further, in Commerce’s Decision Memo, itstated that UNL’s situation was different ‘‘due to the fact that UNL’stails provision is premised on certain services provided by an affili-ated party.’’ Decision Memo at 30. UD’s tails provision, on the otherhand, is premised on services provided by an unaffiliated party, thusaccounting for a difference in estimates. According to 19 U.S.C.§ 1677b(f)(2),35 transactions between affiliated parties may be disre-garded if the amounts do not fairly reflect market rates. In addition,the final tails disposal provision ‘‘depends on numerous counterbal-ancing factors,’’ including the fact that the three Urenco companiesestimates differ because storage capacity at each company’s facilitiesdiffer. Defendant’s Response at 56 (citing Germany Cost Verif. Reportat 16–18). Urenco’s Response at 56 (citing Germany Cost Verif. Re-port at 16–18). The record evidence shows that exact comparisonsare not possible.

USEC offers no evidence to support its assertions, aside fromclaiming Commerce ‘‘implicitly’’ makes its determinations. USEC’sentire argument is built on speculation, with a conspicuous absenceof factual support. USEC even goes so far as to argue that ‘‘the factthat UD’s assumptions may be required ‘German government policy’or German law is simply irrelevant.’’ USEC’s Reply at 27. In the ab-

35 19 U.S.C. § 1677b(f)(2) states:

A transaction directly or indirectly between affiliated persons may be disregarded if, inthe case of any element of value required to be considered, the amount representing thatelement does not fairly reflect the amount usually reflected in sales of merchandise un-der consideration in the market under consideration. If a transaction is disregarded un-der the preceding sentence and no other transactions are available for consideration, thedetermination of the amount shall be based on the information available as to what theamount would have been if the transaction had occurred between persons who are notaffiliated.


sence of evidentiary support for USEC’s arguments, and in light ofCommerce’s reasonable explanations, the Department’s treatment ofthe tails disposal cost was supported by substantial evidence and inaccordance with law.

CLow Enriched Uranium From The Netherlands, Court No.

02–00114

There are no country-specific issues in this case.

VIConclusion

All parties having agreed at oral argument that if the court sus-tains Commerce’s findings, all of the issues in these cases are de-cided.36 Commerce’s Final Determination is sustained and USEC’sMotion for Judgment Upon the Agency Record is Denied.

�

USEC INC. and UNITED STATES ENRICHMENT CORPORATION, Plain-tiffs, v. UNITED STATES, Defendant.

Before: WALLACH, JudgeCourt Nos.: 02–00112, 02–00113, 02–00114

ORDER AND JUDGMENT

This case having come before the court upon the Motion for Judg-ment Upon the Agency Record filed by USEC Inc. and United StatesEnrichment Corporation (collectively, ‘‘Plaintiffs’ Motion’’); the courthaving reviewed all pleadings and papers on file herein, havingheard oral argument by each party, and after due deliberation, hav-ing reached a decision herein; now, in conformity with said decision,it is hereby

ORDERED ADJUDGED AND DECREED that Plaintiffs’ Motionis DENIED, and it is further

ORDERED ADJUDGED AND DECREED that the decision of theU.S. Department of Commerce (‘‘Commerce’’) in Notice of Final De-terminations of Sales at Not Less Than Fair Value: Low EnrichedUranium From the United Kingdom, Germany and the Netherlands,66 Fed. Reg. 65,886 (December 21, 2001) is hereby SUSTAINED;and it is further

ORDERED that all parties shall review the court’s Opinion in thismatter and notify the court in writing on or before Tuesday, May 15,2007, whether any information contained in the Opinion is confiden-tial, identify any such information, and request its deletion from thepublic version of the Opinion to be issued thereafter. The partiesshall suggest alternative language for any portions they wish de-


leted. If a party determines that no information needs to be deleted,that party shall so notify the court in writing on or before May 15,2007.

�

Slip Op. 07–100

PAUL MU..

LLER INDUSTRIE GMBH & CO. et al., Plaintiffs, v. UNITEDSTATES, Defendant, and TIMKEN US CORPORATION, Defendant-Intervenor.

Before: WALLACH, JudgeConsol. Court No.: 04–00522

PUBLIC VERSION

[The United States Department of Commerce’s Final Remand Determination onAntifriction Bearings and Parts Thereof from France, Germany, Italy, Japan,Singapore, and the United Kingdom is AFFIRMED.]

Dated: June 29, 2007

Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, (Bruce M. Mitchell, MarkE. Pardo and William F. Marshall) for Plaintiffs Paul Mu.. ller Industrie GmbH & Co.,FAG Kugelfischer AG, FAG Italia S.p.A., Barden Corporation (U.K.) Limited, FAGBearings Corporation and The Barden Corporation.

Steptoe & Johnson LLP (Herbert C. Shelley, Alice A. Kipel and Susan R. Gihring)for Plaintiffs SKF USA Inc., SKF France S.A., Sarma, SKF GmbH, and SKF IndustrieS.p.A.

Peter D. Keisler, Assistant Attorney General; Claudia Burke International TradeField Office, Commercial Litigation Branch, Civil Division, U.S. Department of Jus-tice; and Mykhaylo A. Gryzlov, Attorney, Office of Chief Counsel for Import Adminis-tration, U.S. Department of Commerce, of Counsel, for Defendant United States.

OPINION

Wallach, Judge:

IINTRODUCTION

This matter comes before the court following its remand on May26, 2006, to the United States Department of Commerce (‘‘Com-merce’’ or ‘‘the Department’’). In Paul Mu..ller Industrie GmbH & Co.v. United States, 435 F. Supp. 2d 1241 (CIT 2006) (‘‘Paul Mu..ller I’’),the court remanded in part the Department’s determination for PaulMu..ller Industrie GmbH & Co. (‘‘Paul Mfuller’’) in the administrativereview of the antidumping duty order on antifriction bearings andparts thereof from Germany in Antifriction Bearings and PartsThereof from France, Germany, Italy, Japan, Singapore, and theUnited Kingdom: Final Results of Antidumping Duty Administrative


Reviews, Rescission of Administrative Reviews in Part, and Determi-nation to Revoke Order in Part, 69 Fed. Reg. 55,574 (September 15,2004) (‘‘Final Results’’) (as amended by Ball Bearings and PartsThereof from Germany; Amended Final Results of Antidumping DutyAdministrative Review, 69 Fed. Reg. 63,507 (November 2, 2004)(‘‘Amended Final Results’’)).

In Paul Mu..ller I the court granted Commerce’s request for remandto fully explain its calculation of Paul Mu..ller’s inventory carryingcosts, and if necessary open the record for additional information.Paul Mu..ller I, 435 F. Supp. 2d at 1247. The court also granted theDepartment’s request for a remand to correct a clerical error regard-ing Paul Mu..ller’s margin program. Id. This court has jurisdictionpursuant to 28 U.S.C. § 1581(c). For the reasons that follow, Com-merce’s Remand Determination is affirmed.

IIBACKGROUND

On September 15, 2004, Commerce published in the Federal Reg-ister its Final Results of its review of the antidumping duty orderson antifriction bearings and parts thereof from France, Germany,Italy, Japan, Singapore, and the United Kingdom covering the periodof review from May 1, 2002, through April 30, 2003. Final Results,69 Fed. Reg. at 55,574. The scope of this order covers antifrictionballs, ball bearings with integral shafts, ball bearings (including ra-dial ball bearings) and parts thereof, and housed or mounted ballbearing units and parts thereof. Final Results, 69 Fed. Reg. at55,575.

The court remanded this matter in part upon Commerce’s requestto allow the Department to explain its calculation of Paul Mu..ller’scarrying costs and to correct a clerical error regarding Paul Mu..ller’smargin program.1 Paul Mu..ller I, 435 F. Supp. 2d at 1247. Oral argu-ment concerning Commerce’s Remand Determination was held onApril 24, 2007.

IIISTANDARD OF REVIEW

This court will sustain Commerce’s determinations, findings, orconclusions unless they are ‘‘unsupported by substantial evidence onthe record, or otherwise not in accordance with law.’’ 19 U.S.C.

1 None of the parties commented on the Department’s correction of the billing adjust-ment in the margin calculations, which involved an inadvertent change in the value of allobservations for a particular invoice number instead of changing one observation as was in-tended. Paul Mu

..ller Industrie GmbH & Co. v. United States, 435 F. Supp. 2d at 1247 (‘‘Re-

mand Determination’’). Upon review of the adjustment, and having received no commentsfrom the parties, the correction in the margin calculations is affirmed and will not be dis-cussed below.


§ 1516a(b)(1)(B); Magnesium Corp. of Am. v. United States, 166 F.3d1364, 1368 (Fed. Cir. 1999). Substantial evidence has been definedas ‘‘such relevant evidence as a reasonable mind might accept as ad-equate to support a conclusion’’ and ‘‘more than a mere scintilla.’’Nippon Steel Corp. v. United States, 337 F.3d 1373, 1379 (Fed. Cir.2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L. Ed 126 (1938)). Under this standard the court does notsubstitute its own judgment for that of the agency, and the possibil-ity of drawing two inconsistent conclusions from the evidence pre-sented does not necessarily prevent the agency’s findings from beingsupported by substantial evidence. Negev Phosphates, Ltd. v. UnitedStates, 12 CIT 1074, 1076–77, 699 F. Supp. 938 (1988); Consolo v.Fed. Mar. Comm’n, 383 U.S. 607, 619–20, 86 S. Ct. 1018, 16 L. Ed.2d 131 (1966) (citing NLRB v. Nevada Consolidated Copper Corp.,316 U.S. 105, 106, 62 S. Ct. 960, 86 L. Ed. 1305 (1942)).

The court uses a two step analysis to determine the level of defer-ence to give an agency’s statutory interpretation. Chevron U.S.A.Inc. v. Natural Res. Def. Council, Inc. et al., 467 U.S. 837, 842–43,104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). The court examines, first,whether ‘‘Congress has directly spoken to the precise question at is-sue,’’ in which case, courts ‘‘must give effect to the unambiguouslyexpressed intent of Congress.’’ Id. at 842–43. If Congress instead lefta gap for the agency to fill, the agency’s regulation is ‘‘given control-ling weight unless [it is] arbitrary, capricious, or manifestly contraryto the statute.’’ Id. at 843–44. The Court of Appeals for the FederalCircuit has held that statutory interpretation by Commerce is en-titled to deferential treatment by the courts in their review underChevron. Pesquera Mares Australes Ltda. v. United States, 266 F.3d1372, 1382 (Fed. Cir. 2001).

IVDISCUSSION

The court remanded this matter at the request of Commerce forfurther explanation of the Department’s calculation of Paul Mu..ller’scarrying costs in its home and U.S. markets, and to address the as-sertion made by Defendant-Intervenor Timken US Corporation(‘‘Timken’’) that Commerce’s treatment of Paul Mu..ller’s home mar-ket was inconsistent with its treatment of its U.S. carrying costs.Paul Mu..ller I, 435 F. Supp. 2d at 1247. Upon remand, the Depart-ment determined that Paul Muller valued its inventory with respectto its home market carrying costs based on its own cost of goods sold,and its U.S. sales by applying its interest rate factor to the enteredvalue of each model that represents the transfer price to its U.S. af-filiate. Final Remand Determination, Paul Mu..ller Industrie GmbH& Co. v. United States, Consol. Court No. 04–00522 (September 13,2006) (‘‘Remand Determination’’) at 3. After reviewing the record,Commerce determined that there was information available that


would allow it to calculate inventory carrying costs in both marketson a consistent basis. Id. at 4. The Department thus recalculated theU.S. and home market costs to reflect the respective cost of produc-ing each model on a per-unit cost. Id. In response, Timken arguedthat the Department still needs to account for U.S. carrying costs in-curred on an ex-factory basis, as it did for the home market side. Id.Timken suggested that the sum of the time in inventory in the homemarket, the transit time, and the time in inventory in the U.S. wouldbe a more accurate approach for the calculation. Id. The Departmentresponds in its Remand Determination that its longstanding practiceis to treat in-transit inventory carrying costs as indirect selling ex-penses relating to the sale to the affiliate, rather than associatedwith economic activity in the U.S. market. Id. (citing Stainless SteelButt-Weld Pipe Fittings From Taiwan: Final Results of AntidumpingDuty Administrative Review, 63 Fed. Reg. 67,855, 67,856 (December9, 1988) (‘‘Stainless Steel Final Results’’)). In this case, Commerce de-termined that both in-transit carrying costs and time in inventory inthe home market are not associated with U.S. economic activity orthe resale of the merchandise. Id. at 5. Timken also suggested thatCommerce consider the entered value as the cost of goods upon entryto the U.S., to which the Department responded that there was suffi-cient information to allow Commerce to calculate cost factors thatbetter reflect the respective cost in the two markets. Id. at 4, 6.

ATimken Waived its Argument Regarding Freight, Duty, and

Brokerage Fees by Failing to Raise it in Agency Proceedings

In Timken US Corporation’s Comments on Commerce’s RemandResults (‘‘Timken’s Comments’’), Timken argues that for U.S. inven-tory, the estimate of inventory cost must account for costs incident tothe transaction between the producer and the U.S. affiliate such astransportation costs, duties, and brokerage fees. Timken’s Com-ments at 2. According to Timken, the statute reflects that additionalcosts are incurred to transport and sell the product where it providesfor the adjustment of U.S. prices for ‘‘any additional costs, charges,or expenses, and United States import duties, which are incident tobringing the subject merchandise from the original place of ship-ment in the exporting country to the place of delivery in the UnitedStates.’’ Id. at 3 (quoting 19 U.S.C § 1677a(c)(2)(A)). Timken re-quests that the Department adjust the value of the products in U.S.inventory to reflect those costs.

Defendant responds that the methodology used in the remand wasreasonable because it allocates expenses in a consistent way andcomports with the Department’s prior practice.2 Defendant’s Re-

2 Plaintiff Paul Mu..ller’s Response Memorandum in Opposition to Timken US Corpora-


sponse to Timken’s Comments upon the Results of the Final RemandDetermination (‘‘Defendant’s Response’’) at 6. Additionally, Defen-dant notes that Timken advocated the result reached in the RemandDetermination in the administrative case brief it filed after Com-merce’s preliminary results, and only changed its position during theremand proceedings. Id. (citing Timken’s Case Brief at 22, PublicRecord at 213; Timken’s Rule 56.2 Motion for Judgment on theAgency Record at 24). Defendant asserts that in this case Timken isrequesting that Commerce add expenses incurred overseas and re-lating solely to sales from Paul Mu..ller to its affiliated importer inthe U.S. Id. at 8. Defendant also argues that because Timken failedto present its argument after the preliminary results and the draftremand determination, Timken waived its right to raise the argu-ment now. Id. at 9–10 (citing Carpenter Tech. Corp. v. United States,464 F. Supp. 2d 1347 (CIT 2006)). Counsel for Paul Muller addedduring oral argument that Exhibit N of Paul Muller’s original Sec-tion A Questionnaire Response accounts for freight as ‘‘other ex-penses’’ which are directly deducted from the U.S. price. Defendant’sConfidential Appendix, Tab 2, Response of Paul Mu..ller IndustrieGmbH & Co. KG to Antidumping Questionnaire Section A, ExhibitN.

Timken waived its right to raise the issue of freight, duties, andbrokerage fees by failing to raise the issue before Commerce in thecourse of its review. See Ta Chen Stainless Steel Pipe v. UnitedStates, 342 F. Supp. 2d 1191, 1205 (CIT 2004) (noting that all argu-ments relevant to a decision must be presented to the agency in casebriefing). The doctrine of exhaustion provides that ‘‘no one is entitledto judicial relief for a supposed or threatened injury until the pre-scribed administrative remedy has been exhausted.’’ Sandvik SteelCo. v. United States, 164 F.3d 596, 599 (Fed. Cir. 1998) (quotingMcKart v. United States, 395 U.S. 185, 193, 89 S. Ct. 1657, 23 L. Ed.2d 194 (1969)). Timken failed to raise this challenge both after thePreliminary Results and in its remand comments to commerce. Aparty that fails to exhaust administrative remedies waives the rightto raise them on appeal. AIMCOR v. United States, 141 F.3d 1098,1111–12 (Fed. Cir. 1998); Ta Chen Stainless Steel Pipe, 342 F. Supp.2d at 1205. As counsel for the United States asserted during oral ar-gument, that Timken raised general issues regarding inventory car-rying costs is not adequate to apprise Commerce of what it wouldneed to specifically respond to regarding these additional issues.Thus, Timken waived its right to argue that additional costs be con-sidered upon appeal.

tion’s Rule 59 Motion for Reconsideration (Paul Mu..ller’s Response) follows the arguments

made by Defendant unless otherwise noted. Plaintiff SKF declined to file commentary onthe remand. See Letter from SKF to the court dated December 21, 2007.


BThe Department’s Treatment of Paul Mu..ller’s Carrying

Costs Upon Remand was Correct

According to the Government, Commerce’s regular practice is totreat in-transit carrying costs as indirect selling expenses related tothe sale to the affiliate rather than associated with economic activityor the sale of the merchandise in the U.S. Defendant’s Response at 7.Additionally, Defendant argues that the result Commerce reachedupon remand is the result Timken advocated in the case briefs itfiled before the agency and before this court; Timken only changedits position once it became apparent that the cost-based comparisonwould not result in more than a de minimis margin for Plaintiff. Id.at 6–7.

Commerce’s treatment of Paul Mu..ller’s inventory carrying costs issupported by substantial evidence and is in accordance with law. Asthere is no methodology mandated by statute for assessing inventorycosts, Commerce has considerable discretion to determine its methodof calculation. E.I. Dupont De Nemours & Co. v. United States, 22CIT 220, 229, 4 F. Supp. 2d 1248, 1256 (1998); see Chevron, 467 U.S.at 842–43 (stating that when a statute is silent on a particular mat-ter the court is only to assess whether the agency’s interpretation isa permissible one). In this case, Commerce used information on therecord to calculate inventory costs based on the cost of manufactur-ing from both markets. Remand Determination at 3–4. This changefrom the use of entered value for the U.S. market allowed Commerceto follow its prior practice of calculating inventory carrying costsbased on the cost of manufacturing. See, e.g, Extruded RubberThread from Malaysia; Final Results of Antidumping Duty Adminis-trative Review, 63 Fed. Reg. 12,752, 12,760 (March 16, 1998). Addi-tionally, as Commerce explains in its Remand Determination, it isthe agency’s practice to treat in-transit carrying costs as indirectselling expenses related to the sale to the affiliate rather than re-lated to U.S. economic activity or the resale of the merchandise. Re-mand Determination at 4; see Stainless Steel Final Results, 63 Fed.Reg. at 67,856. This approach is reasonable under the substantialevidence standard of review applicable to this case; Commerce neednot recalculate the inventory carrying costs to account for the addi-tional costs incident to the transaction between the producer and theaffiliate, as Timken suggests. In fact, the approach taken by Com-merce in its Remand Determination is consistent with that advo-cated by Timken itself throughout the review until the determina-tion was remanded. As the approach used by Commerce to calculatePaul Mu..ller’s inventory carrying costs is permissible under the anti-dumping statute, Commerce’s Final Remand Determination is af-firmed.


VCONCLUSION

For the above stated reasons, Commerce’s Remand Determinationis affirmed.

�

PAUL MU..

LLER INDUSTRIE GMBH & CO., et al., Plaintiffs, v. UNITEDSTATES, Defendant, and TIMKEN US CORPORATION, Defendant-Intervenor.

Before: WALLACH, JudgeConsol. Court No.: 04–00522

ORDER AND JUDGMENT

Upon consideration of the U.S. Department of Commerce’s (‘‘Com-merce’’) Final Remand Determination on Antifriction Bearings andParts Thereof from France, Germany, Italy, Japan, Singapore, andthe United Kingdom (‘‘Remand Determination’’), filed pursuant tothis court’s Order dated July 31, 2006; the court having reviewed allcomments contesting the Remand Determination and all pleadingsand papers on file herein, and good cause appearing therefor, thecourt having found that Commerce’s Remand Determination is in ac-cordance with this court’s Order; it is hereby

ORDERED that Commerce’s Remand Determination is AF-FIRMED; and it is further

ORDERED that all parties shall review the court’s Opinion in thismatter and notify the court in writing on or before Monday, July 9,2007, whether any information contained in the Opinion is confiden-tial, identify any such information, and request its deletion from thepublic version of the Opinion to be issued thereafter. The partiesshall suggest alternative language for any portions they wish de-leted. If a party determines that no information needs to be deleted,that party shall so notify the court in writing on or before July 9,2007.


Slip Op. 07 – 107

ALLIED TUBE & CONDUIT CORP., IPSCO TUBULARS INC., ANDWHEATLAND TUBE COMPANY, Plaintiffs, v. UNITED STATES, Defen-dant, and TOSÇELIK PROFIL VE SAC ENDUSTRISI A.S., Defendant-Intervenor.

Before: Richard W. Goldberg,Senior Judge

Court No. 06–00285PUBLIC VERSION

[Commerce’s final new shipper review determination is remandedfor further con-sideration and explanation of the commercialreasonableness of Defendant-Intervenor’s single U.S. sale.]

Dated: July 9, 2007

Schagrin Associates (Roger B. Schagrin, Brian E. McGill, and Michael JamesBrown) for Plaintiffs Allied Tube & Conduit Corp., IPSCO Tubulars Inc., andWheatland Tube Company.

Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson, Director, PatriciaM. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S.Department of Justice (David S. Silverbrand); Office of the Chief Counsel for ImportAdministration, U.S. Department of Commerce (Jennifer I. Johnson), Of Counsel, forDefendant United States.

Law Offices of David L. Simon (David L. Simon) for Defendant-Intervenor TosçelikProfil ve Sac Endustrisi A.S.

OPINION

GOLDBERG, Senior Judge: On May 31, 2005, Tosçelik Profil veSac Endustrisi A.S. and its affiliated trading company Tosyali DisTicaret A.S. (collectively, ‘‘Tosçelik’’) requested that the U.S. Depart-ment of Commerce (‘‘Commerce’’) conduct a new shipper reviewbased on a single U.S. sale during the period of review from May 1,2004 through April 30, 2005 (‘‘POR’’). Commerce found that thesingle U.S. sale was bona fide, and subsequently determined that azero percent antidumping duty margin existed. Certain Welded Car-bon Steel Pipe and Tube from Turkey, 71 Fed. Reg. 43444, 43445(Dep’t Commerce Aug. 1, 2006) (final results of new shipper review).Allied Tube and Conduit Corporation, IPSCO Tubulars, Inc., andWheatland Tube Company (collectively, ‘‘Allied Tube’’) have broughtthis action to challenge Commerce’s determination that Tosçelik’ssingle U.S. sale during the POR was bona fide. For the reasons thatfollow, the Court remands the issue of whether Tosçelik’s single U.S.shipment was a bona fide transaction.

I. STANDARD OF REVIEW

A court shall hold unlawful Commerce’s final determination in anantidumping administrative review if it is ‘‘unsupported by substan-


tial evidence on the record, or otherwise not in accordance with thelaw. . . .’’ 19 U.S.C. § 1516a(b)(1)(B)(i) (2000). Substantial evidence is‘‘ ‘such relevant evidence as a reasonable mind might accept as ad-equate to support a conclusion.’ ’’ Nippon Steel Corp. v. UnitedStates, 337 F.3d 1373, 1379 (Fed. Cir. 2003) (quoting Consol. EdisonCo. v. NLRB, 305 U.S. 197, 229 (1938)). ‘‘Even if it is possible todraw two inconsistent conclusions from evidence in the record, sucha possibility does not prevent Commerce’s determination from beingsupported by substantial evidence.’’ Am. Silicon Techs. v. UnitedStates, 261 F.3d 1371, 1376 (Fed. Cir. 2001). To determine if substan-tial evidence exists, the Court reviews the record as a whole, includ-ing evidence that supports as well as evidence that ‘‘fairly detractsfrom the substantiality of the evidence.’’ Atl. Sugar, Ltd. v. UnitedStates, 744 F.2d 1556, 1562 (Fed. Cir. 1984).

II. DISCUSSION

A. New Shipper Review and the Bona Fide Sale Test

On May 15, 1986, Commerce published an antidumping duty or-der on imports of welded carbon steel pipe and tube from Turkey. SeeWelded Carbon Steel Standard Pipe and Tube Products from Turkey,51 Fed. Reg. 17784 (Dep’t Commerce May 15, 1986) (final determi-nation). The order imposes an ‘‘all others’’ antidumping duty rate of14.74%, which applies to Turkish producers and exporters that havenot had their antidumping duty rate determined in an investigationor review. Id. If a producer or exporter did not export merchandisethat was the subject of an antidumping duty order during a previousinvestigation period, it may request a new shipper review. See 19U.S.C. § 1675(a)(2)(B) (2000).1 During the course of a new shipperreview, Commerce endeavors to establish an individual dumpingmargin and antidumping duty rate for the new shipper. This processallows the new shipper to demonstrate that the ‘‘all others’’ rateshould not apply to its entries. On May 31, 2005, Tosçelik timely re-

1 A new shipper review may be requested pursuant to the following requirements:

If the administering authority receives a request from an exporter or producer of thesubject merchandise establishing that–(I) such exporter or producer did not export themerchandise that was the subject of an antidumping duty or countervailing duty order tothe United States (or, in the case of a regional industry, did not export the subject mer-chandise for sale in the region concerned) during the period of investigation, and (II)such exporter or producer is not affiliated (within the meaning of section 1677(33) of thistitle) with any exporter or producer who exported the subject merchandise to the UnitedStates (or in the case of a regional industry, who exported the subject merchandise forsale in the region concerned) during that period, the administering authority shall con-duct a review under this subsection to establish an individual weighted average dump-ing margin or an individual countervailing duty rate (as the case may be) for such ex-porter or producer.

19 U.S.C. § 1675(a)(2)(B)(i) (2000); see also 19 C.F.R. § 351.214 (2006).


quested a new shipper review based on a single sale to the UnitedStates.

When a new shipper review involves only a single U.S. sale, it isCommerce’s practice to determine if that sale is a bona fide transac-tion. See Freshwater Crawfish Tail Meat from the People’s Republicof China, 68 Fed. Reg. 1439, 1440 (Dep’t Commerce Jan. 10, 2003)(rescission of new shipper review); Fresh Garlic from the People’s Re-public of China, 67 Fed. Reg. 11283, 11284 (Dep’t Commerce Mar.13, 2002) (rescission of new shipper review). A sale is not bona fidewhen it is ‘‘commercially unreasonable’’ or ‘‘atypical of normal busi-ness practices.’’ Tianjin Tiancheng Pharmaceutical Co. v. UnitedStates, 29 CIT , , 366 F. Supp. 2d 1246, 1249–50 (2005); seealso Windmill Int’l Pte., Ltd. v. United States, 26 CIT 221, 230, 193 F.Supp. 2d 1303, 1313 (2002). Commerce makes this determination sothat a producer does not ‘‘unfairly benefit from an atypical sale to ob-tain a lower dumping margin than the producer’s usual commercialpractice would dictate.’’ Tianjin, 29 CIT at , 366 F. Supp. 2d at1250. A single sale is not inherently commercially unreasonable, but‘‘it will be carefully scrutinized to ensure that new shippers do notunfairly benefit from unrepresentative sales.’’ Id. at , 366 F.Supp. 2d at 1263.

Commerce looks at the totality of the circumstances to determinewhether a particular sale is bona fide. See Hebei New DonghuaAmino Acid Co. v. United States, 29 CIT , , 374 F. Supp. 2d1333, 1338 (2005). In the present case, Commerce initially issued aCommercial Reasonableness Memorandum (‘‘CRM’’) which set forthits basis for finding that Tosçelik’s U.S. sale was commercially rea-sonable under the totality of the circumstances. See CRM, A–489–501, NSR 5/1/04–4/30/05 (Apr. 24, 2006); Pl.’s App. 5A–B. In theCRM, Commerce considered three factors: (1) the price and quantityof the U.S. sale; (2) the sales process; and (3) freight expenses. Com-merce subsequently issued the preliminary results of the new ship-per review on May 3, 2006, and found that Tosçelik’s sale had nodumping margin. Certain Welded Carbon Steel Pipe and Tube fromTurkey, 71 Fed. Reg. 26043, 26047 (Dep’t Commerce May 3, 2006)(preliminary results). Commerce subsequently adopted the same po-sition in its final determination. Certain Welded Carbon Steel Pipeand Tube from Turkey, 71 Fed. Reg. at 43445. In that determination,Commerce referred to its Issues and Decision Memorandum (‘‘IDM’’),which found Tosçelik’s single U.S. sale to be commercially reason-able, and therefore bona fide. IDM, A–489–501, POR 5/1/04–4/30/05(Aug. 1, 2006), available at http://ia.ita.doc.gov/frn/summary/turkey/E6-12372-1.pdf.

Allied Tube challenges Commerce’s determination that Tosçelik’stransaction is bona fide. Specifically, it claims that the price, quan-tity and freight expense of the sale indicate that the transaction isnot commercially reasonable.


B. Commerce’s Determination That the Price of Tosçelik’sU.S. Sale Is Commercially Reasonable Is Not Supportedby Substantial Evidence

i. Overview of Commerce’s Methodology Comparing theUnit Value of Tosçelik’s Sale to the Average Unit Valueof Other Turkish Exporters

Commerce calculated the average unit value (‘‘AUV’’) per metricton (‘‘MT’’) for all U.S. imports of welded steel pipe and tube fromTurkey during the POR, and found that the unit value of Tosçelik’ssale is about [ ] the AUV of all imports from Turkey.2 Commercedid not primarily rely on a comparison between the AUV of all im-ports from Turkey and the unit value of Tosçelik’s sale. Instead,Commerce obtained data from U.S. Customs and Border Protection(‘‘Customs’’) that listed the AUV of each Turkish exporter during thePOR. The unit value of Tosçelik’s single sale fell within the range ofthe other Turkish exporters’ AUVs ([ ] per MT). Commerce con-cluded that because Tosçelik’s sale is ‘‘comfortably within the rangeof other commercial transactions . . . [there is] no reason to suspectthat [it] is not a bona fide commercial transaction.’’ CRM 4.

The ‘‘range’’ Commerce refers to is derived from a chart attachedto the CRM. The chart is reproduced here:3

[ REDACTED ]

CRM Attach. 1 (Confidential). Each row represents data from a spe-cific Turkish exporter. The far left column lists the total quantity ofwelded steel pipe and tube shipped from each exporter.4 The nextcolumn lists the total value of the shipments, followed by the AUVfor each exporter. Tosçelik’s shipment is represented by the companyname ‘‘Tosyali Dis Ticaret A.S.,’’ which is Tosçelik’s affiliated tradingcompany. The unit value of Tosçelik’s sale, [ ] per MT, does indeedfall within the range of AUVs listed by exporter.

2 In the chart provided by Commerce, Tosçelik’s unit value is [ ] per MT. CRM Attach. 1(Confidential). Commerce reached this value by dividing the ‘‘entered value’’ of Tosçelik’ssingle U.S. sale [ ] by the ‘‘theoretical quantity’’ of the shipment [ ]. Whereas the chartlists the [ ] per MT figure, the analysis in the CRM refers to the AUV of Tosçelik’s sale as[ ] per MT. The [ ] per MT figure is reached by dividing the ‘‘total value’’ of the sale [ ]by the ‘‘actual quantity’’ [ ]. Presumably, this includes the transportation costs associatedwith the sale. It is unclear why Commerce includes the [ ] figure in the chart, but dis-cusses the [ ] figure in its analysis. The Court’s determination that Tosçelik’s sale is [ ]than the AUV of all Turkish imports is based on the [ ] figure. The discrepancy rises to[ ] when the [ ] figure is used. The precise calculation does not affect the disposition ofthis case at this stage in the proceedings, but may be highly relevant on remand.

3 The names of some exporters have been shortened for formatting purposes.4 The chart encompasses steel pipe and tube classified under the same Harmonized Tar-

iff Schedule of the United States (‘‘HTSUS’’) classification as Tosçelik’s U.S. shipment.


Allied Tube believes that the range of AUVs used by Commerce inthe above chart includes highly aberrational data. Specifically, therange of data used by Commerce includes a small quantity of sales[ ] imported at relatively high prices.5 Allied Tube argues that asingle sale with a unit value in the [ ] percentile is atypical of nor-mal business practices and commercially unreasonable. If the top[ ] of sales by quantity is excluded, the remaining [ ] of all im-ports by quantity fall within an AUV range between [ ] per MT.Tosçelik’s sale, at [ ] per MT, does not fall within this range. Thus,Allied Tube claims the price of Tosçelik’s sale is commercially unrea-sonable.

ii. Commerce’s ‘‘Range’’ Methodology Including AllegedlyDistortive Entries Does Not Reasonably Support Its De-termination That Tosçelik’s Sale Is Commercially Rea-sonable

The Court must now determine whether Commerce’s ‘‘range’’methodology, which includes the allegedly distortive entries, is rea-sonable and supported by substantial evidence. Commerce has thediscretion to choose whatever methodology it deems appropriate, aslong as it is reasonable and its conclusions are supported by substan-tial evidence. See Federal-Mogul Corp. v. United States, 18 CIT 785,807–08, 862 F. Supp. 384, 405 (1994); see also Windmill, 26 CIT at230, 193 F. Supp. 2d at 1312 (‘‘Given Commerce’s discretion in em-ploying a methodology to exclude sales from the United States pricethat are unrepresentative or distortive . . . the Court must deter-mine whether Commerce’s actions in this case were reasonable.’’).

Allied Tube believes that Commerce acted contrary to its own es-tablished practice ‘‘of using AUVs derived only after excluding aber-rant data for its analysis’’ to determine the commercial reasonable-ness of U.S. sales in new shipper reviews. Pl.’s Mot. J. Agency R. 13.Commerce does frequently choose to exclude aberrational data in itsantidumping duty determinations. See, e.g., Hebei, 29 CIT at ,374 F. Supp. 2d at 1340 (approving Commerce’s exclusion of ‘‘clearlyaberrational’’ data in a new shipper review); Luoyang Bearing Corp.(Group) v. United States, 29 CIT , , 358 F. Supp. 2d 1296,1299 (2005) (in determining a surrogate value for China, Commerceexcluded price data from countries with steel imports of less thanseven MTs); Shanghai Foreign Trade Enters. Co. v. United States, 28CIT , , 318 F. Supp. 2d 1339, 1350 (2004) (explaining thatwhen calculating surrogate values for non-market economies, it isCommerce’s practice to exclude aberrational data); FAG U.K. Ltd. v.United States, 20 CIT 1277, 1282, 945 F. Supp. 260, 265 (1996) (per-

5 The [ ] of imports by quantity that Allied Tube argues should be excluded from Com-merce’s analysis are those imported by [ ]. Pl.’s Mot. J. Agency R. 12 n.7. These exporterseach have an AUV of [ ] per MT or higher.


mitting Commerce to exclude ‘‘certain sales which are clearly atypi-cal’’ in an antidumping administrative review). Commerce excludesaberrant data because a ‘‘[f]air (apples to apples) comparison is thegoal of the price comparisons required by the antidumping laws. . . .’’Am. Permac, Inc. v. United States, 16 CIT 41, 42, 783 F. Supp. 1421,1423 (1992).

While Commerce often excludes potentially aberrational data inits antidumping determinations, it is not always required to do so. InCorus Staal BV v. United States, the plaintiff, a domestic party, chal-lenged Commerce’s decision to include sales of defective merchandisein its calculation of the U.S. price. 27 CIT 388, 404–05, 259 F. Supp.2d 1253, 1267–68 (2003). The plaintiff argued that because transac-tions involving defective merchandise are not in the ‘‘ordinary courseof trade,’’ they must be excluded from the analysis. The Court dis-agreed, and stated that unlike the definition of normal value,6 thedefinition of U.S. price contains no requirement that Commerce ex-clude sales that are arguably outside of the ordinary course of trade.Id. at 406, 259 F. Supp. 2d at 1269.

Corus Staal is easily distinguishable from the present case be-cause the commercial reasonableness test for new shipper reviewsnecessarily implies that the analysis should only include prices ‘‘inthe ordinary course of trade.’’ Commerce cannot reasonably concludethat the price of a new shipper’s single sale is commercially reason-able if it is only similar to prices that are atypical of the industry. Inthe present case, the ‘‘range’’ methodology can only be deemed rea-sonable if Commerce can explain why the allegedly distortive en-tries, some over [ ] the AUV for the industry, should be included inthe range of reasonableness. When Commerce’s commercial reason-ableness determination hinges on comparing the new shipper saleprice to a range of values, it is crucial to make sure the values atboth ends of that range are commercially reasonable.

Commerce has not only failed to explain why its ‘‘range’’ methodol-ogy is reasonable, but it even suggests that its own dataset might beoverinclusive and therefore inaccurate. Commerce states:

Given that the [HTSUS] numbers covered by the scope includemore than subject merchandise, [and] that actual products in-cluded within any given shipment maybe different from eachother[,] [a] direct comparison between shipments should not beviewed as accurate price to price comparison. Rather, such dataare generally reflective of commercial transactions.

CRM 5 n.3. In other words, the high-priced, small-quantity sales in-cluded in Commerce’s analysis might be different types of merchan-

6 The definition of ‘‘normal value’’ is ‘‘the price at which the foreign like product is firstsold . . . for consumption in the exporting country, in the usual commercial quantities and inthe ordinary course of trade. . . .’’ 19 U.S.C. § 1677b(a)(1)(B)(i)(2000) (emphasis added).


dise than the standard pipe imported by Tosçelik even though theyare encompassed in the same HTSUS classification. The potentialinaccuracy of the dataset further undermines the reasonableness ofCommerce’s ‘‘range’’ methodology.

In previous investigations, Commerce stressed the importance ofcomparing the total AUV of all imports to the new shipper sale. InHebei, where Commerce determined that a new shipper sale was notbona fide, Commerce viewed the large price differential between thenew shipper sale and the AUV of all the entries of the subject mer-chandise as significant. See 29 CIT at , 374 F. Supp. 2d at 1336.Specifically, Commerce compared the Chinese manufacturer’s U.S.sale price to:

(1) the weighted AUV of all Chinese entries of the subject mer-chandise during the POR that were covered by the anti-dumping duty order and not clearly aberrational based onproprietary data in the Customs database;

(2) the weighted AUV of all Chinese imports of the subject mer-chandise during the POR based on public import statistics;and

(3) the weighted AUV of U.S. imports of the subject merchan-dise from all countries during the POR based on publiclyavailable U.S. import data.

See id. at , 374 F. Supp. 2d at 1336; see also Tianjin, 29 CIT at, 366 F. Supp. 2d at 1255 (stating that the prices listed in four

invoices from a single company ‘‘do not go as far as the AUV data inshowing the typical price for Plaintiff ’s product’’). By contrast, inthis case, Commerce relied primarily on a comparison of Tosçelik’ssale to small import quantities with comparatively high per-unit val-ues. Commerce has not persuaded the Court that this methodologyis reasonable. See Shanghai, 28 CIT at , 318 F. Supp. 2d at 1351(‘‘A Commerce decision to rely on potentially aberrational data with-out explanation and contrary to its own practice is not based on sub-stantial evidence and cannot be sustained.’’).

In summary, Commerce’s ‘‘range’’ methodology is a shaky founda-tion on which to rest its conclusion that the price of Tosçelik’s sale iscommercially reasonable. The methodology merely shows that theunit value of Tosçelik’s sale is [ ] the AUVs of certain other Turkishexporters’ aggregated entries under the same HTSUS classification.Given that the unit value of Tosçelik’s sale is [ ] the AUVs of theTurkish exporters that comprise [ ] of the total U.S. imports ofwelded carbon steel pipe and tube by quantity, Commerce has failedto demonstrate, by substantial evidence, that Tosçelik’s price is com-mercially reasonable. As such, this issue is remanded so that Com-merce may attempt to explain why its methodology is reasonable, orto point to other grounds that support its ultimate conclusion that


Tosçelik’s sale is commercially reasonable. Cf. Luoyang BearingCorp. (Group) v. United States, 28 CIT , , 347 F. Supp. 2d1326, 1353 (2004) (remanding because Commerce failed to explainwhy it did not address the aberrational import data that the plain-tiffs believed should be excluded).

iii. Commerce’s Analysis Excluding Allegedly DistortiveEntries Does Not Demonstrate That Tosçelik’s Sale IsCommercially Reasonable

In response to Allied Tube’s concerns, Commerce explains in its fi-nal determination that even if the allegedly distortive data are ex-cluded, Tosçelik’s sale would still be considered commercially reason-able. IDM 5–6. To support this conclusion, Commerce states that adisaggregation of import data from major Turkish exporters indi-cates there are ‘‘a meaningful number of shipments with comparableunit values and quantities.’’ Id. 6. Commerce does not point to anyuseful shipment-level data to demonstrate what it means by a‘‘meaningful’’ number of shipments or ‘‘comparable’’ unit values andquantities. Instead, Commerce asserts that ‘‘while the average valueof each shipment of welded pipe and tube during the POR was [ ],the value of individual shipments ranged from [ ] to [ ].’’ CRM 4.Commerce claims that because the value of Tosçelik’s single ship-ment fits within this range, it is commercially reasonable. However,this analysis is problematic because Commerce only compares thevalue, but ignores the quantity, of each individual shipment. Thisrange of values is meaningless if the quantity of each shipment isunknown. Instead, Commerce could have disaggregated the importdata, calculated the shipment unit values, and then compared themto the unit value of Tosçelik’s shipment. At present, Commerce hasnot demonstrated by substantial evidence that when the allegedlydistortive entries are excluded from the analysis, Tosçelik’s sale iscommercially reasonable.7

7 Commerce also suggests that Allied Tube did not include all relevant figures in itsanalysis:

[W]e found [Allied Tube’s] analysis did not include the AUV for a certain Turkish manu-facturer, which was within a reasonable range of Tosçelik’s AUV and higher than thethreshold AUV identified by petitioner. Moreover, the entry for the exporter reported by[Customs] was disregarded in petitioner’s analysis altogether, despite the fact that thespecific exporter’s shipment was higher in volume than Tosçelik’s U.S. sale. Further-more, the entered value of Tosçelik’s U.S. sale is only slightly higher than the enteredvalue of sales made by the specific exporter not named by the petitioner, as reported by[Customs].

IDM 5–6. This explanation is difficult to comprehend because the Court is unable to iden-tify the ‘‘certain Turkish manufacturer’’ that Allied Tube failed to include in its analysis. Al-lied Tube appears to have accounted for all of the exporters listed in the chart accompany-ing the CRM. See Pl.’s Mot. J. Agency R. 12 n.7. Additionally, the Court is unable to find anentry that: (1) has an AUV that is higher than ‘‘the threshold AUV identified by petitioner’’(i.e., [ ] per MT), (2) has a higher quantity than Tosçelik’s sale, and (3) has an entered


iv. Tosçelik’s U.S. Sale, in Comparison to Its Home MarketPrices, Does Not Demonstrate That the Sale Is Com-mercially Reasonable

At the suggestion of Allied Tube, Commerce compared Tosçelik’sU.S. sale price to its home market prices. Allied Tube alleges thatthe price of Tosçelik’s single U.S. sale was [ ] than Tosçelik’s aver-age home market sales.8 If this were true, it would support the claimthat Tosçelik was artificially inflating its U.S. price in order to ob-tain a favorable antidumping duty margin. In response, Commercestates that it ‘‘used the prices included in [Tosçelik’s home marketdatabase] and calculated an average [home market price] that isvery comparable to the AUV of U.S. imports. . . .’’9 IDM 5. Notably,Commerce did not directly compare the price of Tosçelik’s U.S. saleto its home market sales. Instead Commerce found that Tosçelik’shome market sales were comparable to the AUV for all U.S. imports.As a result, the usefulness of this analysis is entirely dependent onhow Tosçelik’s U.S. sale compares to the AUV for all U.S. imports.Because, as discussed above, Commerce’s analysis of the AUV of allU.S. imports does not demonstrate that Tosçelik’s sale was commer-cially reasonable, Commerce’s analysis of the home market salesprovides no independent support for its position.

C. Commerce’s Determination That the Quantity ofTosçelik’s U.S. Sale Is Commercially Reasonable Is Sup-ported by Substantial Evidence

Allied Tube claims that there is not substantial evidence to sup-port Commerce’s conclusion that the quantity of Tosçelik’s U.S. saleis commercially reasonable. In its final determination, Commercefound that:

[The quantity of Tosçelik’s U.S. sale] is not atypical of Tosçelik’snormal business practices. Specifically, the majority ofTosçelik’s home market sales are made with invoices that havea total quantity that is less than the sale in question. There-fore, we find the quantity of Tosçelik’s one sale to the U.S. iscomparable to the size of Tosçelik’s sales in its home market,

value that is only slightly lower than Tosçelik’s sale.

Therefore, this explanation is insufficient to support Commerce’s finding that the price ofTosçelik’s single U.S. sale is commercially reasonable.

8 Allied Tube claims that Tosçelik’s U.S. sale ([ ] per MT) was priced [ ] than that ofthe average of Tosçelik’s home market sales. Pl.’s Mot. J. Agency R. 11. In fact, the U.S. saleis only [ ] than the average home market sale.

9 The original language states ‘‘U.S. price’’ instead of ‘‘homemarket price.’’ The Court as-sumes this is a clerical error, because Commerce could not have used Tosçelik’s home mar-ket price database in order to calculate an average U.S. price.


and consistent with Tosçelik’s business practices in the homemarket.

IDM 5. The fact that Tosçelik’s single U.S. sale is of a larger quantitythan a majority of its home market sales is adequate to support theconclusion that the quantity is commercially reasonable. Cf. Wind-mill, 26 CIT at 231, 193 F. Supp. 2d at 1313 (‘‘[S]ingle sales, eventhose involving small quantities, are not inherently commerciallyunreasonable and do not necessarily involve selling practices atypi-cal of the parties’ normal selling practices.’’).10

D. Commerce’s Determination That the Freight ChargesIncludedin Tosçelik’s U.S. Sale Price Are CommerciallyReasonableIs Not Supported by Substantial Evidence

Tosçelik shipped its U.S. sale by container with an internationalfreight charge of [ ] per MT.11 Allied Tube points out that thisfreight charge is [ ] the average international freight charge forU.S. imports from Turkey that fall under the same HTSUS classifi-cation category as Tosçelik’s entry. Pl.’s Reply Br. 11. Commerce hasconsidered extraordinarily high freight costs to be evidence that asale is not bona fide. See Windmill, 26 CIT at 231, 193 F. Supp. 2d at1313.

To support its finding that Tosçelik’s freight cost is not unreason-ably high, Commerce states that it ‘‘verified Tosçelik’s reportedfreight expenses and found the container shipment to be consistentwith Tosçelik’s typical business practices.’’ IDM 6. Commerce cites toa Sales Verification Exhibit that shows how much Tosçelik paid forthe freight cost. See id. n.14. Commerce has not adequately ex-plained how this information supports the conclusion that Tosçelik’sfreight charge in this case was consistent with its typical businesspractices.

Commerce also suggests that Tosçelik’s freight expenses are sohigh because ‘‘Tosçelik’s U.S. sale was shipped by container ratherthan full vessel load and included inland freight expenses from the

10 Allied Tube points out that the average quantity per shipment of welded carbon steelpipe and tube from Turkey during the POR was more than [ ] the quantity of Tosçelik’sshipment. Pl.’s Mot. J. Agency R. 17–18. However, Commerce has demonstrated that thequantity of the sale is in line with Tosçelik’s selling practices in its home market. The factthat Tosçelik’s sale is smaller than the industry average does not render it commercially un-reasonable if the quantity is typical of Tosçelik’s normal business practices.

11 Initially, Allied Tube claimed that the international freight cost of Tosçelik’s sale was[ ] per MT. Pl.’s Mot. J. Agency R. 18. Allied Tube believed that this figure excluded domes-tic shipping costs. Defendant-Intervenor Tosçelik responded that this was a clear misstate-ment of fact, because the [ ] per MT figure does in fact include domestic inland freight.Def.-Int.’s Resp. Br. 32–33. In its Reply Brief, Allied Tube explained that it believed [ ] perMT constituted only the international freight cost Tosçelik reported in its questionnaire re-sponse that ‘‘international freight’’ was [ ] per MT. Pl.’s Reply Br. 10–11. Allied Tube cor-rected its initial error, and states that the actual international freight charge (excluding do-mestic inland freight) is [ ] per MT. Id. 11.


port of Mersin, Turkey.’’ Id. 6. The fact that the shipment was madeby container is irrelevant because Commerce did not demonstratethat it is commercially reasonable to use this method of shipment.Additionally, the [ ] figure does not include domestic inland freightin Turkey. Pl.’s Reply Br. 11. Even without the additional cost of do-mestic inland freight, the international freight cost of Tosçelik’s saleis [ ] the industry average.

Commerce claims that although Tosçelik’s freight charges may behigher than average, this fact alone does not render the sale com-mercially unreasonable. In American Silicon Technologies v. UnitedStates, the Court held that a high shipping price or unusual mode ofshipment does not alone render a sale commercially unreasonable.24 CIT 612, 617–18, 110 F. Supp. 2d 992, 997 (2000). In that investi-gation, Commerce had found that although the shipping costs werehigh, the timing and mode of shipment did not indicate the sale wascommercially unreasonable because the merchandise entered theUnited States ‘‘fully six months’’ prior to the POR and the exporterdid not request a new shipper review. Silicon Metal from Brazil, 64Fed. Reg. 6305, 6317 (Dep’t Commerce Feb. 9, 1999) (final results ofnew shipper review). The Court sanctioned that approach. Am. Sili-con Techs., 24 CIT at 618, 110 F. Supp. 2d at 997. By contrast,Tosçelik’s single shipment entered the United States on April 28,2005, only two days before the end of the POR. Additionally, Tosçelikrequested the new shipper review. This record evidence seems to un-dercut Commerce’s claim that ‘‘there was no evidence that thefreight charge was incurred for any reason related to the new ship-per review.’’ Def.’s Resp. 17. Both the timing of the sale and Tosçelik’srequest for the new shipper review indicate otherwise.

In summary, there is ample record evidence that Tosçelik’s freightcharges are too high to be commercially reasonable. Commerce hasfailed to present any contradictory evidence that amounts to morethan unsupported assertions. As a result, Commerce’s finding thatTosçelik’s freight charge does not indicate that the sale is commer-cially unreasonable is not supported by substantial evidence.

E. Commerce’s Ultimate Determination That Tosçelik’sSingle U.S. Sale Is Bona Fide Is Not Supported by Sub-stantial Evidence

The Court must aggregate Commerce’s findings to ultimately de-termine whether there is substantial evidence to support its decisionthat under the totality of the circumstances, Tosçelik’s single U.S.sale is bona fide. See Tianjin, 29 CIT at , 366 F. Supp. 2d at1249–50. As discussed above, Commerce has failed to show that sub-stantial evidence supports its findings that the price and freight costof Tosçelik’s sale are commercially reasonable. On the other hand,there is substantial evidence to support Commerce’s finding that thequantity of Tosçelik’s sale is commercially reasonable. The only re-


maining factor Commerce considered is Tosçelik’s ‘‘sales process.’’CRM 5. Commerce reviewed Tosçelik’s home market and export sell-ing practices, and found that the U.S. sale ‘‘followed the same salesprocess as their other export sales.’’ CRM 5. Allied Tube does not dis-pute this finding. The fact that Tosçelik appears to have followed itsnormal business practices in executing its single U.S. sale is evi-dence that the sale is bona fide. Cf. Windmill, 26 CIT at 231, 193 F.Supp. 2d at 1313 (holding that purchaser’s failure to follow normalbusiness practices is evidence that sale is not bona fide). However,‘‘the price factor has significant weight, and cannot necessarily beoffset by a recitation of other factors by which the sale could be con-sidered typical. . . .’’ Tianjin, 29 CIT at , 366 F. Supp. 2d at 1263.Accordingly, under the totality of the circumstances, the Court doesnot find substantial evidence to support Commerce’s finding thatTosçelik’s U.S. sale is bona fide.

III. CONCLUSIONS

For the foregoing reasons, the Court remands Commerce’s finalnew shipper review determination. Specifically, Commerce must ex-plain, if it is able, why its ‘‘range’’ methodology (ranking the AUVs ofthe aggregate imports, within the same HTSUS classification, ofeach Turkish exporter) is a reasonable approach to determiningwhether the price of Tosçelik’s U.S. sale is commercially reasonable.In the course of this explanation, Commerce must address why theseemingly distortive entries identified by Allied Tube should not beexcluded from the analysis concerning the price of Tosçelik’s U.S.sale. If Commerce is unable to provide such an explanation, it musteither (1) point to other record evidence that shows whetherTosçelik’s sale is a bona fide transaction under the totality of the cir-cumstances, or (2) conduct further investigations to determine thesame. A separate order will be issued accordingly.

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ALLIED TUBE & CONDUIT CORP., IPSCO TUBULARS INC., ANDWHEATLAND TUBE COMPANY, Plaintiffs, v. UNITED STATES, Defen-dant, and TOSÇELIK PROFIL VE SAC ENDUSTRISI A.S., Defendant-Intervenor.

Before: Richard W. Goldberg,Senior Judge

Court No. 06–00285PUBLIC VERSION

Upon consideration of Plaintiffs’ motion for judgment upon theagency record and briefs in support thereof, Defendant’s andDefendant-Intervenor’s briefs in opposition thereto, upon all other


papers and proceedings had herein, and upon due deliberation, it ishereby

ORDER

ORDERED that Commerce’s final antidumping duty new shipperreview determination in Certain Welded Carbon Steel Pipe and Tubefrom Turkey, 71 Fed. Reg. 43444 (Aug. 1, 2006) is remanded;and it isfurther

ORDERED that Commerce explain, if it is able, why its ‘‘range’’methodology (ranking the AUVs of the aggregate imports, within thesame HTSUS classification, of each Turkish exporter) is a reason-able approach to determine whether the price of Tosçelik’s U.S. saleis commercially reasonable; and it is further

ORDERED that Commerce address in the course of that explana-tion why the seemingly distortive entries identified by Allied Tubeshould not be excluded from the analysis concerning the price ofTosçelik’s U.S. sale; and it is further

ORDERED that Commerce shall, if it is unable to provide suchan explanation, point to other record evidence or conduct further in-vestigations to determine whether the price of Tosçelik’s single U.S.sale is commercially reasonable; and it is further

ORDERED that Commerce shall explain why, in the course ofcomparing the AUV of Tosçelik’s single U.S. sale to other AUV data,it refers to a different value in its data chart [ ] than in the text ofits Commercial Reasonableness Memorandum [ ], and it is further

ORDERED that Commerce shall, if it is able, point to record evi-dence, or, if other record evidence is unavailable, conduct further in-vestigations to adequately explain why the freight charge associatedwith Tosçelik’s sale is typical of Tosçelik’s business practices, or oth-erwise commercially reasonable; and it is further

ORDERED that if Commerce is unable to conclude that Tosçelik’ssale is a bona fide transaction, the new shipperreview shall be re-scinded; and it is further

ORDERED that Commerce shall, within sixty (60) days of thedate of this Order, issue a remand determination in accordance withthe instructions provided herein; and it is further

ORDERED that the parties may, within twenty (20) days of thedate on which Commerce issues its remand determination, submitbriefs addressing Commerce’s remand determination, not to exceedtwenty (20) pages in length; and it is further


ORDERED that the parties may, within fifteen (15) days of thedate on which briefs addressing Commerce’s remand determinationare filed, submit response briefs, not to exceed fifteen (15) pages inlength.

SO ORDERED.

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Slip Op. 07–109

JAZZ PHOTO CORPORATION, Plaintiff, v. UNITED STATES, Defen-dant.

Before: Judge Timothy C. StanceuCourt No. 04–00494

[Granting in part plaintiff ’s application for attorneys’ fees and expenses under theEqual Access to Justice Act]

Decided: July 16, 2007

Neville Peterson LLP (John M. Peterson, Curtis W. Knauss, George W. Thompson,Maria E. Celis and Catherine Chess Chen) for plaintiff.

Peter D. Keisler, Assistant Attorney General, Jeanne E. Davidson, Director, PatriciaM. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division,United States Department of Justice (Stefan Shaibani and David S. Silverbrand);Beth Brotman and Paul Pizzeck, Customs and Border Protection, United States De-partment of Homeland Security, of counsel, for defendant.

OPINION AND ORDER

Stanceu, Judge: Before the court is the application of Jazz PhotoCorporation (‘‘Jazz’’ or ‘‘plaintiff ’’) for attorneys’ fees and other ex-penses under the Equal Access to Justice Act (‘‘EAJA’’), 28 U.S.C.§ 2412(d) (2000). The court conditionally grants the application inpart because the positions that the United States (‘‘defendant’’) tookbefore the United States Court of Appeals for the Federal Circuit ontwo of the issues in the litigation – the issue of permissible repairand the issue of segregation of merchandise – were not substantiallyjustified.

I. BACKGROUND

The subject EAJA application arose from litigation involvingJazz’s importations into the United States of certain ‘‘lens-fitted filmpackages’’ (‘‘LFFPs’’), which are more commonly known as ‘‘dispos-able cameras,’’ ‘‘single use cameras,’’ or ‘‘one-time use cameras.’’ TheLFFPs that Jazz imported were previously-used LFFPs that hadbeen fitted (‘‘refurbished’’ or ‘‘reloaded’’) in China with new rolls of


film and, for some models, new batteries for the flash mechanism.Background information relevant to Jazz’s EAJA application is pre-sented in the opinion of the United States Court of Appeals for theFederal Circuit (‘‘Court of Appeals’’) in Jazz Photo Corp. v. Int’lTrade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001) (‘‘Jazz I’’), the opinionof the United States Court of International Trade in Jazz PhotoCorp. v. United States, 28 CIT , 353 F. Supp. 2d 1327 (2000)(‘‘Jazz II’’), and the opinion of the Court of Appeals in Jazz PhotoCorp. v. United States, 439 F.3d 1344 (Fed. Cir. 2006) (‘‘Jazz III’’),which affirmed the court’s judgment in Jazz II. A summary of thebackground information pertinent to the court’s ruling on plaintiff ’sEAJA application is presented below.

In its application, Jazz seeks, under 28 U.S.C. § 2412(d) (2000),legal fees and expenses paid to the law firm Neville Peterson LLP inlitigation before the Court of International Trade and the Court ofAppeals in Jazz II and Jazz III, respectively. Jazz II arose from liti-gation that Jazz commenced in the Court of International Trade onOctober 4, 2004 to contest the denial by United States Customs andBorder Protection (‘‘Customs’’) of Jazz’s administrative protest of theexclusion from entry of two of its shipments of LFFPs that were en-tered at the port of Los Angeles/Long Beach, California on August 26and August 27, 2004. Jazz II, 28 CIT at , , 353 F. Supp. 2d at1329–30, n.2. On September 24 and September 26, 2004, respec-tively, Customs excluded all merchandise in the August 26 and Au-gust 27 shipments. Id. at 1329. In so doing, Customs ruled that theimported LFFPs were excluded from entry by a General ExclusionOrder and Order to Cease and Desist (‘‘Exclusion Order’’) issued in1999 by the U.S. International Trade Commission (‘‘ITC’’ or ‘‘Com-mission’’) pursuant to Section 337 of the Tariff Act of 1930, asamended, 19 U.S.C. § 1337 (2000) (‘‘Section 337’’). Id. at 1329, 1331.In 1998, Fuji Photo Film Co., Ltd. (‘‘Fuji’’), the holder of various pat-ents used in manufacturing LFFPs, had initiated the Section 337proceedings, in which the ITC determined that LFFPs imported byJazz infringed patents held by Fuji. Id.; see In the Matter of CertainLens-Fitted Film Packages, USITC Pub. No. 3219, Inv. No. 337–TA–406 (Aug. 1999). On or about September 26, 2004, Jazz filed an ad-ministrative protest under 19 U.S.C. § 1514 contesting the exclusionof the merchandise in the August 26 and August 27, 2004 shipments.Jazz II, 28 CIT at , 353 F. Supp. 2d at 1329. On September 29,2004, Customs denied the protest, concluding that Jazz had not es-tablished admissibility of the imported LFFPs. Id. at 1330, n.2.

During the litigation contesting the denial of the protest, theCourt of International Trade set an expedited trial schedule with theconsent of both parties. Id. To establish admissibility of its importedmerchandise, Jazz was required to prove that the LFFPs in the twoshipments were outside the scope of the Exclusion Order. See id. at1329. This required Jazz to show that the spent disposable camera


‘‘shells’’ refurbished in China resulted from disposable cameras thathad undergone a patent-exhausting ‘‘first sale’’ in the United Statesand that the reloading operation effected a ‘‘permissible repair,’’rather than a ‘‘prohibited reconstruction,’’ of the original camera. Id.at 1333. During a four-day bench trial on October 12–14 and October18, 2004, plaintiff produced documentary, videographic, and testimo-nial evidence relevant to the issues of permissible repair and firstsale. Id. at 1330, 1340–47. The government did not introduce its ownevidence at trial to demonstrate that Jazz’s importations were notentitled to admission. Id. at 1340–41. Instead, the United Stateschallenged the sufficiency of the proof of admissibility offered byJazz, arguing that Jazz had failed to meet its burden of rebutting astatutory presumption that the decision by Customs to exclude themerchandise was correct. See id. at 1333, 1340–41; 28 U.S.C.§ 2639(a)(1) (2000). The government argued that Jazz’s factualshowings on the shell collection procedure and the reloading opera-tion failed to satisfy the burden of proof for the admissibility of anyindividual camera. See Jazz II, 28 CIT at , 353 F. Supp. 2d at1333, 1340–41.

The imported LFFPs at issue in Jazz II had been refurbished byPolytech Enterprise Limited (‘‘Polytech’’) at facilities in China. Themajority of these LFFPs were produced from used shells thatPolytech obtained from a collector of shells, Photo Recycling Enter-prise, Inc. (‘‘Photo Recycling’’). The remaining LFFPs were processedusing shells that Jazz acquired from another shell collector, SevenBuck’s Inc. (‘‘Seven Buck’s’’), and provided to Polytech for processing.Id. at 1341–42. The court held in Jazz II that plaintiff had producedevidence sufficient to establish a ‘‘first sale’’ for the LFFPs processedfrom shells purchased from Photo Recycling and that these LFFPswere entitled to admission to the extent that Jazz could demonstratethat these LFFPs could be segregated from the remaining camerasin the two shipments. Id. at 1347–54. The court concluded thatplaintiff failed to establish a ‘‘first sale’’ in the United States for theLFFPs processed from the Seven Buck’s shells, which accordinglydid not qualify for admission. Id. at 1348–50. Distinguishing be-tween the two types of shells, the court concluded that Jazz was un-able to produce evidence showing that the Seven Buck’s shells hadbeen collected, directly or indirectly, from photo processors located inthe United States. Id. The court further held that plaintiff producedevidence sufficient to establish that all of the LFFPs in the two ship-ments had undergone processing constituting a permissible repair.Id. at 1347–48. Because the two shipments contained some LFFPsresulting from Seven Buck’s shells, the court issued an order direct-ing Customs, with the participation of Jazz, to conduct an examina-tion of the merchandise to determine if the LFFPs processed fromSeven Buck’s shells could be segregated from the remaining LFFPsin the shipments. Id. at 1352; Order for Expedited Administrative


Determination (Nov. 5, 2004). The court reopened the trial record toallow the parties to obtain and to introduce evidence on the segrega-tion issue and considered the responsive submissions of the parties.Jazz II, 28 CIT at , 353 F. Supp. 2d at 1352. The court concludedthat Jazz had established the ability to segregate the LFFPs madefrom Seven Buck’s shells from the admissible LFFPs, except for cer-tain cartons in which LFFPs from the master lot number Jazz hadassigned to Seven Buck’s shells (‘‘Master Lot Number 463’’) werecommingled with other master lot numbers, for which cartons thecourt, in entering judgment, denied admissibility in the entirety. Id.at 1352–54.

Following appeal by Jazz, the government, and Fuji, the Court ofAppeals affirmed the court’s judgment in Jazz II. See Jazz III, 439F.3d at 1358. No party sought a rehearing or a writ of certiorari.

II. DISCUSSION

Jazz brings its application for attorneys’ fees and expenses pursu-ant to USCIT Rule 54.1(a), under which the court may award attor-neys’ fees and expenses where authorized by law. Jazz argues thatEAJA, 28 U.S.C. § 2412(d)(1)(A), authorizes the award of attorneys’fees and expenses in this case. Pl.’s Application for an Award of Att’yFees Under the Equal Access to Justice Act 1 (‘‘Pl.’s Application’’). Inpertinent part, EAJA provides as follows:

Except as otherwise specifically provided by statute, a courtshall award to a prevailing party other than the United Statesfees and other expenses . . . incurred by that party in any civilaction . . . including proceedings for judicial review of agencyaction, brought by or against the United States in any courthaving jurisdiction of that action, unless the court finds thatthe position of the United States was substantially justified orthat special circumstances make an award unjust.

28 U.S.C. § 2412(d)(1)(A). To award fees and expenses upon anEAJA claim, the court must determine that the claimant met the fol-lowing criteria: plaintiff prevailed in the action, the government’s po-sition was not substantially justified, the award of attorneys’ fees isnot unjust, and the fee application is timely filed and supported byan itemized statement. Comm’r, INS v. Jean, 496 U.S. 154, 158(1990). An application is timely if submitted to the court withinthirty days of final judgment in the action. 28 U.S.C.§ 2412(d)(1)(B).

In addition to those criteria, § 2412(d) imposes financial eligibilityrequirements. A company that operates for profit is an eligible‘‘party’’ under subsection (d) if it has a net worth not exceeding$7,000,000 and not more than 500 employees at the time the civil ac-tion was filed. 28 U.S.C. § 2412(d)(2)(B)(ii). Defendant does not ar-gue that plaintiff has failed to satisfy the financial eligibility re-


quirements. See Def.’s Response to Pl.’s Application for Fees andOther Expenses under the Equal Access to Justice Act 28 U.S.C.§ 2412(d), Title II of Pub. Law 96–481, 94 Stat. 2325 and Rule 54.1(‘‘Def.’s Response’’). Based on the parties’ submissions, the courtfinds that plaintiff has satisfied these financial eligibility require-ments. See Pl.’s Application, Ex. A (setting forth plaintiff ’s bank-ruptcy petition).

Plaintiff seeks fees and expenses incurred during the appellatelitigation culminating in the Jazz III decision as well as the litiga-tion conducted before the Court of International Trade in Jazz II;there is no indication in the opinion of the Court of Appeals inJazz III or in the briefs plaintiff filed therein that plaintiff soughtEAJA fees and expenses for its appellate representation during theJazz III litigation. Therefore, an awarding of fees and expenses forthe appellate phase of the case would require the court to make de-terminations regarding substantial justification and special circum-stances with respect to issues raised before, and decided by, theCourt of Appeals. The first question, then, is whether there is anybar to a trial court’s making these determinations and awarding feesand expenses accordingly.

The court finds no such bar. EAJA authorizes the award to bemade by ‘‘a court.’’ 28 U.S.C. § 2412(d)(1)(A). See United States v.22249 Dolorosa St., 190 F. 3d 977, 981 (9th Cir. 1999) (concludingthat an appellate court may make an EAJA award but assuming‘‘that in the usual case in which fees are sought for the entire litiga-tion, the determination of whether the government was ‘substan-tially justified’ . . . is for the district court to make.’’). An EAJAaward may include fees and other expenses for an appeal. See Jeanv. Nelson, 863 F.2d 759, 770 (11th Cir. 1988) (concluding that EAJAauthorizes a lower court to award fees for work done on appeal butreversing the trial court’s award of fees incurred in litigation beforethe Supreme Court because the claimant did not prevail on appeal atthat level), aff ’d on other grounds, Comm’r, INS v. Jean, 496 U.S.154 (1990).

The court next considers whether Jazz qualifies as a prevailingparty for EAJA purposes. A prevailing party is one that ‘‘succeed[s]on any significant issue in litigation which achieves some of the ben-efit the parties sought in bringing suit.’’ Hensley v. Eckerhart, 461U.S. 424, 433 (1983) (internal quotation marks and citation omitted).The government does not contest that plaintiff prevailed on the partof its claim pertaining to the Photo Recycling LFFPs. It is sufficientfor this purpose that plaintiff succeeded in obtaining the release ofsome of the excluded merchandise and successfully defended on ap-peal the judgment partially in its favor. Nor does the governmentcontest Jazz’s satisfying the requirements of timeliness and supportof the fee application statement. Defendant argues instead thatplaintiff ’s application must be denied because the government’s posi-


tion in the litigation was substantially justified and because specialcircumstances exist to make an award unjust.

For the reasons discussed below, the court concludes that defen-dant, in opposing plaintiff ’s EAJA application, has met its burden ofestablishing that the position it took in the Jazz II and Jazz III liti-gation with respect to the first sale requirement was substantiallyjustified. The court further concludes that defendant was substan-tially justified in the position it took in the Jazz II litigation on theissue of permissible repair but was not substantially justified in pur-suing its position on permissible repair before the Court of Appealsin the Jazz III litigation. The court also concludes that defendanthas not established a substantial justification for its contesting, dur-ing that appeal, the Order for Expedited Administrative Determina-tion that the Court of International Trade issued in the Jazz II liti-gation to address the segregation of Jazz’s merchandise. The courtdetermines that the positions taken by Customs in the administra-tive proceeding resulting in the Jazz II and Jazz III litigation weresubstantially justified. Finally, the court does not find special cir-cumstances that would render unjust an award pertaining to attor-neys’ fees and other expenses that plaintiff incurred during the ap-pellate litigation of these two issues.

The court, rather than award fees and other expenses at this time,is ordering plaintiff to submit a revised application statement thatidentifies the fees and other expenses for the specific legal servicesrendered in litigating before the Court of Appeals the issue ofwhether the processing conducted on Jazz’s imported merchandiseconstituted permissible repair and the issue of the authority of theCourt of International Trade to order an expedited administrativeproceeding directed to the segregation of merchandise.

A. The Government’s Litigation Position Was SubstantiallyJustified in Part

When a party seeking fees and expenses under EAJA has pre-vailed in litigation against the government, the government bearsthe burden of establishing that its position was substantially justi-fied or that special circumstances preclude an EAJA award.Covington v. Dep’t of Health & Human Serv., 818 F.2d 838, 839 (Fed.Cir. 1987); see 28 U.S.C. § 2412(d)(1)(A). The term ‘‘substantiallyjustified’’ means ‘‘justified in substance or in the main–that is, justi-fied to a degree that could satisfy a reasonable person. That is no dif-ferent from [a] reasonable basis both in law and fact.’’ Pierce v.Underwood, 487 U.S. 552, 565 (1988) (internal quotation marks andcitations omitted). That a party other than the government prevaileddoes not establish that the government’s position was not substan-tially justified. Luciano Pisoni Fabbrica Accessori InstrumentiMusicali v. United States, 837 F.2d 465, 467 (Fed. Cir. 1988). In-stead, the determination of whether to award attorneys’ fees is ‘‘a


judgment independent of the result on the merits . . . reached by ex-amination of the government’s position and conduct through theEAJA prism, . . . not by redundantly applying whatever substantiverules governed the underlying case.’’ Id. (internal quotation marksand citations omitted).

1. The Government’s Position on First Sale was SubstantiallyJustified

The government argued in Jazz II that Jazz could not meet itsburden on the first sale requirement unless it could establish by apreponderance of the evidence ‘‘that each and every one of the cam-eras contained in the two entries at issue were made with shells firstsold in the United States.’’ Def.’s Post-Trial Br. 5. In the post-trialphase of the case, the United States argued generally that Jazz hadfailed to establish that each of the LFFPs in the two shipments satis-fied the first sale requirement. Id. at 1. The government supportedits general argument by citing to testimony by Mr. Zawodny, Jazz’squality manager with oversight responsibility of the shell sortingprocess conducted by Polytech. Mr. Zawodny testified to the effectthat it may not have been possible for Polytech to screen out all ‘‘for-eign’’ shells, i.e., shells from LFFPs that were first sold in a foreigncountry; the testimony pertained specifically to shells with English-language labels that may have been first sold abroad in an English-speaking foreign country or shells from new LFFPs that were la-beled in both English and French and that likely were first sold inCanada. Id. at 10–14; see Jazz II, 28 CIT at , 353 F. Supp. 2d at1344. The government also emphasized that Polytech’s sorters were,for the most part, not English-speaking. Jazz II, 28 CIT at , 353F. Supp. 2d at 1344. As the court found in Jazz II, the evidence es-tablished that Polytech’s sorting process depended on comparingshell packaging to packaging on sample packages. Id. Although Mr.Zawodny had testified that, in his opinion, the sorting system is‘‘quite accurate’’ and ‘‘works well,’’ the court in Jazz II was not pre-sented with record evidence demonstrating that the sorting systemwas error-free, and the court did not so conclude. See id. at 1344–45.In arguing that Jazz’s proof fell short of demonstrating that everycamera in the two shipments satisfied the first sale requirement andthat, accordingly, all the merchandise at issue should be excludedfrom entry, the government’s argument had a reasonable basis infact.

In Jazz II, the court relied on various findings of fact, reasonableinferences, and conclusions of law in determining that Jazz haddemonstrated admissibility of the LFFPs resulting from refurbish-ing of shells obtained from Photo Recycling. The record evidence inJazz II relevant to the first sale issue did not consist of documentaryevidence, such as sales records, that directly established the originalsale in the United States of each LFFP that later was refurbished


and imported by Jazz. Id. at 1333. The court in Jazz II concludedthat the nature of the business in which Jazz was engaged made ob-taining such documentary evidence impracticable. Id.

Jazz instead produced evidence, which consisted in part of testi-mony that the court found credible, supporting the finding that thePhoto Recycling shells, unlike the Seven Buck’s shells, were col-lected, directly or indirectly, from photo processors in the UnitedStates. See id. at 1348–49. With respect to the Photo Recyclingshells, the court applied a ‘‘presumption of regularity’’ under whichCustoms is presumed to have enforced the Exclusion Order to pre-vent the commercial importation of patent-infringing LFFPs. Id. at1334. The conclusion of admissibility also required the court to makecertain findings of fact and conclusions of law concerning the issue of‘‘tourist shells,’’ i.e., shells resulting from LFFPs that were first soldoutside the United States yet were imported lawfully under a provi-sion of the Exclusion Order allowing for noncommercial importationsof LFFPs sold abroad. Id. at 1334–35. The court explained that be-cause tourist shells could have resulted from these lawfully-imported LFFPs, tourist shells theoretically could be present amongshells collected from photo processors in the United States; the courtconcluded, however, that the evidence of record supported the find-ing that if tourist shells were present in the subject shipments, theywere present as a small percentage of less than one percent. Id. at1335. The court found Polytech’s sorting process, although not shownto be capable of removing every foreign shell, to have been sufficient,in the context of the other facts demonstrated in the case, to estab-lish that Jazz had met its burden of establishing first sale for LFFPsrefurbished from shells collected from photo processors in the UnitedStates. Id. at 1349–50. The discussion in the court’s opinion inJazz II of the evidence Jazz offered on the first sale issue revealsthat the court’s conclusions on the admissibility of the LFFPs fromPhoto Recycling shells and the inadmissibility of the LFFPs fromSeven Buck’s shells depended on the resolution of close factual ques-tions.

In Jazz II, the United States argued for a more stringent interpre-tation of the first sale requirement than that ultimately adopted bythe court. The court concludes, nevertheless, that the government’sargument had a reasonable basis in law. The Court of Appeals estab-lished in Jazz I that the permissible repair defense to patent in-fringement was available to Jazz provided Jazz could establish boththat the first sale of the LFFPs occurred in the United States andthat the refurbishing process constituted permissible repair. SeeJazz I, 264 F.3d at 1102–05. In applying the permissible repair de-fense in the circumstances of the Commission’s Exclusion Order, theCourt of Appeals described the ‘‘first sale’’ requirement of the defenseunambiguously and identified no exceptions to that requirement. Id.at 1105 (stating that ‘‘[the court’s] decision applies only to LFFPs for


which the United States patent right has been exhausted by firstsale in the United States. Imported LFFPs of solely foreign prov-enance are not immunized from infringement of United States pat-ents by the nature of their refurbishment.’’). At the time the govern-ment advanced its argument on first sale in the Jazz II litigation,the nature of the proof necessary to establish first sale of an im-ported refurbished LFFP had not been defined in law and, in this re-spect, can be viewed as a matter of first impression. It was reason-able for the government, during the Jazz II litigation, to advocatean interpretation of Jazz I requiring a higher degree of proof on thefirst sale issue even though the court in Jazz II, as discussed previ-ously, ultimately interpreted the first sale requirement in the con-text of certain commercial realities of the LFFP refurbishing busi-ness and applied a presumption of regularity that Customs wasenforcing the Exclusion Order so as to preclude the importation ofinfringing LFFPs.

The United States also advocated a higher degree of proof of firstsale during the appellate litigation culminating in the decision inJazz III. Specifically, defendant argued on appeal that the Court ofInternational Trade erred in applying the presumption of regularity,i.e., the presumption that Customs was enforcing the Exclusion Or-der, which aided Jazz in establishing the first sale of some of the im-ported merchandise. Br. of Def.-Appellant United States 32–34. Theissue of whether such a presumption of regularity was appropriatewas not addressed in Jazz I and, accordingly, also was a matter offirst impression.

That the issues under consideration were of first impression doesnot necessarily render the position of the government substantiallyjustified. See Devine v. Sutermeister, 733 F.2d 892, 895 (Fed. Cir.1984). The government, for example, may not advocate a positionthat is unsupportable given statutory, regulatory, and judicial au-thority. See id. In Jazz II and Jazz III, however, the government’sgeneral litigation position advocating a stringent interpretation ofthe first sale requirement that was set forth in Jazz I was not incon-sistent with established principles of law and, more specifically, wasa plausible interpretation of the holding of the Court of Appeals inJazz I. As discussed previously, Jazz I stated the first sale require-ment unambiguously and identified no exceptions to that require-ment. Jazz I, 264 F.3d at 1105.

Plaintiff ’s principal argument that the government’s position wasnot substantially justified is that the United States, by declining toput on a case in chief, failed to proffer a factual justification for theexclusion of Jazz’s merchandise and failed to present evidence to re-but the evidence Jazz presented at trial to establish the admissibil-ity of the LFFPs. Pl.’s Application 3, 8–10. Plaintiff argues furtherthat the government introduced no evidence showing that Customshad ever inspected the two shipments, either before or during the


proceedings before the Court of International Trade and presentedno witness to testify about the circumstances of the exclusion or thereasons why Customs believed the goods were inadmissible. Id. Jazzalso argues that the government’s litigation position was not justi-fied in law because, under the decision of the Court of Appeals inJazz I, no absolute ban on the importation of LFFPs was in placeand, accordingly, no exclusion of merchandise was justifiable absentan inspection. Id. at 9.

The decision by Customs to forego introducing evidence to demon-strate the inadmissibility of Jazz’s LFFPs does not require the courtto conclude that the government’s litigation position was not sub-stantially justified. The government was entitled to rely on a pre-sumption that the exclusion of the merchandise by Customs was cor-rect, while Jazz bore the burden of producing evidencedemonstrating that the excluded merchandise qualified for admis-sion. See 28 U.S.C. § 2639(a)(1); Jazz III, 439 F.3d at 1353 (‘‘We rec-ognize that the government was not required to present evidencethat the LFFPs at issue were actually processed from used foreignshells, infringing shells, and tourist shells. However, in the absenceof such conflicting evidence, the court was entitled to give weight toJazz’s evidence.’’); Jazz II, 28 CIT at , 353 F. Supp. 2d at 1333.Meeting the burden of proof required Jazz to satisfy, by a preponder-ance of the evidence, the requirements established in Jazz I; amongthose requirements was that each individual camera offered for ad-mission be shown to have undergone a patent-exhausting first salein the United States. Jazz II, 28 CIT at , 353 F. Supp. 2d at1333.

Similarly, a failure by the government to inspect the LFFPs in thetwo shipments, either during the detention and protest procedure orduring the litigation before the Court of International Trade, doesnot compel a conclusion that the government’s position lacked sub-stantial justification. The findings of fact needed to determine theadmissibility of the merchandise depended in part on evidence thatwas relevant to the ‘‘first sale’’ issue. Certain of that evidence wasbeyond that obtainable by physical inspection, including, in particu-lar, evidence on where and how the shells had been collected. Norwas the government required to present a witness to testify aboutthe circumstances of the exclusion or the reasons why Customs or-dered it. As required by statute, the Jazz II litigation, in whichplaintiff contested the protest denial, was a de novo proceeding, nota review on the administrative record made by the agency. See 28U.S.C. § 2640(a)(1) (2000).

2. The Government’s Position on Permissible Repair WasReasonable at the Trial Level But Lacked Substantial Justification

at the Appellate LevelIn Jazz II and on appeal in Jazz III, the government argued that

Jazz failed to establish that the processing performed on the im-


ported cameras was limited to permissible repair. Jazz III, 439 F.3dat 1353; Jazz II, 28 CIT at , 353 F. Supp. 2d at 1333. The courtconcludes that the government, although proceeding on a reasonablebasis in litigating this issue at the trial level, took on appeal a litiga-tion position on the permissible repair issue that was not substan-tially justified, either in fact or in law.

It was reasonable for the government to argue in Jazz II thatJazz’s factual showing of permissible repair was inadequate. Duringthe trial, defendant cross-examined plaintiff ’s witness, Mr. Zawodny,on the permissible repair issue, testing the extent of Mr. Zawodny’spersonal knowledge of the processing conducted at the Polytech facil-ity in China and challenging the sufficiency of the videotape evi-dence that plaintiff offered in support of its claim of permissible re-pair. See Def.’s Post-Trial Br. 18–19. The government argued that thetwo videotapes admitted into evidence to demonstrate the processingperformed at the Polytech facility were not sufficiently probative be-cause they were made in 2003, prior to the processing of the im-ported LFFPs that occurred in 2004, and because they did not depictthe processing for every kind of camera Jazz imported. Id. at 18. Thegovernment also argued that Polytech had been found to have en-gaged in ‘‘full back replacements’’ in the past and that Jazz failed toestablish that use of full-back replacements had ceased in Polytech’sfacilities. Id. at 18–19. ‘‘Full back replacement’’ refers to the refur-bishing of a Kodak LFFP using a completely new, full-width backcover, a process found to have infringed Fuji’s patents. See Jazz II,28 CIT at , 353 F. Supp. 2d at 1332, 1346.

The resolution at the trial level of the factual issues pertaining tothe question of permissible repair required the court to make find-ings that Mr. Zawodny’s testimony on the nature and extent of theprocesses performed on the imported LFFPs in China was probativeand credible. See id. at 1348. The physical evidence on the permis-sible repair issue was limited to the above-described videotapes,which were made the year prior to the processing of the two ship-ments of imported LFFPs and did not depict the processing of all thetypes of LFFPs that Jazz imported. As a result, the court was calledon to make significant findings on the extent of Mr. Zawodny’sknowledge of the Polytech processes and inventory control systems.See id. Although the court ultimately found that Jazz had estab-lished permissible repair by a preponderance of the evidence, a rea-sonable basis existed on which the defendant could question whetherthat evidence sufficed. The reasonable basis for such a questioning isshown by the fact that Jazz had used full back replacements in thepast and by the limitations inherent in the type and quantity of evi-dence, i.e., the videotapes, that Jazz presented to establish the per-missible repair of the subject LFFPs. Plaintiff did not offer any addi-tional physical evidence on permissible repair, such as morecontemporaneous or comprehensive videotape evidence, nor did


plaintiff introduce documentary evidence such as production recordsidentifying or recording the specific processing steps performed oneach LFFP or type or model of LFFP actually present in the twoshipments.

Following the court’s ruling on permissible repair in Jazz II, how-ever, the defendant did not proceed on a reasonable basis in litigat-ing the permissible repair issue before the Court of Appeals. The ar-gument defendant chose to present to the Court of Appeals on thepermissible repair issue unnecessarily required plaintiff to incur alitigation burden and needlessly consumed the judicial resources ofthe Court of Appeals.

The government argued on appeal in Jazz III that the Court of In-ternational Trade did not apply correctly the legal test for permis-sible repair and that it ‘‘failed to make the requisite findings of factas to whether the processes used to make the LFFPs contained inthe entries at issue were limited to eight steps as described by theCourt in [Jazz I], or 19 substeps described by Court No. 04–00494Page 18 the Court in [Fuji].’’ Reply Br. of Def.-Appellant UnitedStates 14 (citing Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d1368, 1371 (Fed. Cir. 2005), aff ’g, 249 F. Supp. 2d 434 (D.N.J. 2003)(‘‘Fuji’’)). The government argued that the court, by failing to iden-tify ‘‘various minor operations’’ that occurred in the permissible re-pair process, left open the possibility that the processing of the sub-ject LFFPs included a full back replacement step, and also arguedthat the Court of International Trade was required to identify in de-tail the ‘‘minor operations’’ to confirm that no additional steps wereundertaken to process the LFFPs and to confirm that none of thesteps which it identified constituted ‘‘impermissible reconstructionpursuant to the Court’s precedent in [Jazz I].’’ Reply Br. of Def.-Appellant United States 14–15.

The government’s appellate argument pertaining to the steps in apermissible repair process lacked a substantial basis in law. The ar-gument was based on a misinterpretation of Jazz I, in which theCourt of Appeals concluded that refurbishing LFFPs according to theeight-step process identified by the administrative law judge in theunderlying ITC proceeding constituted permissible repair, and notprohibited reconstruction. 264 F.3d at 1098, 1109. That process con-sisted of eight steps: (1) removing the cardboard cover, (2) cuttingopen the plastic casing, (3) inserting new film and a container to re-ceive the film, (4) replacing the winding wheel for certain cameras,(5) replacing the battery for flash cameras, (6) resetting the counter,(7) resealing the outer case, and (8) adding a new cardboard cover.Id. at 1098.

In Jazz II, the Court of International Trade concluded that Jazzdemonstrated that it engaged in permissible repair, rather than pro-hibited reconstruction of LFFPs, based on the following seven-stepprocess undertaken by Polytech: (1) opening of the body of the shell,


(2) replacement of the advance wheel, (3) replacement of the filmand of the battery (if a flash camera), (4) resetting the counter, (5)closing and repairing the case using original parts except for an ad-ditional molded part, (6) repackaging the refurbished camera, and(7) various minor operations incidental to these processes. 28 CIT at

, 353 F. Supp. 2d at 1346. Mr. Zawodny’s testimony at trial de-scribed minor operations incidental to the six-step process under-taken by Polytech, including removing labels and wrappings fromcamera shells, cleaning the shells, removing dust and debris fromthe inside of the camera, conducting loading operations under darkconditions for certain cameras, testing the charge for the flash, andmarking the cameras processed for the U.S. market with an ink dot.Id. at 1345–47.

The government’s argument before the Court of Appeals was notbased on a plausible interpretation of the opinion of the Court of Ap-peals in Jazz I. The eight-step process considered by the Court ofAppeals in Jazz I was found by the administrative law judge to con-stitute ‘‘common steps’’ conducted by various respondents. See 264F.3d at 1101. The Court of Appeals reversed the Commission, con-cluding that the eight-step process – which on the record before theCourt of Appeals was the factual ground for the Commission’s con-clusion of law that prohibited reconstruction had occurred – insteadconstituted permissible repair. Jazz I does not hold that any pro-cessing departing from the eight specific steps constitutes, as a mat-ter of law, prohibited reconstruction. To the contrary, the Court ofAppeals explained in Jazz I that ‘‘[p]recedent has classified as re-pair the disassembly and cleaning of patented articles accompaniedby replacement of unpatented parts that had become worn or spent,in order to preserve the utility for which the article was originally in-tended.’’ Id. at 1103–04 (discussing General Electric Co. v. UnitedStates, 572 F.2d 745 (Ct. Cl. 1978) and Dana Corp. v. American Pre-cision Co., 827 F.2d 755 (Fed. Cir. 1987)). Thus, the discussion of thepermissible repair issue in Jazz I dispels any suggestion that theCourt of Appeals intended to preclude, as prohibited reconstruction,minor operations that were incident to the overall repair process orimplicit in one of the identified steps. As the Court of Appeals statedin Jazz I, prohibited reconstruction is ‘‘‘a second creation of the pat-ented entity.’ ’’ Id. at 1103 (quoting Aro Manufacturing Co. v. Con-vertible Top Replacement Co., 365 U.S. 336, 346 (1961)).

On appeal, defendant’s mischaracterization of the holding ofJazz I was readily apparent from its misguided argument to theCourt of Appeals, as quoted above, that the Court of InternationalTrade in Jazz II ‘‘failed to make the requisite findings of fact as towhether the processes used to make the LFFPs contained in the en-tries at issue were limited to eight steps as described by the Court in[Jazz I], or 19 substeps described by the Court in [Fuji].’’ Reply Br.of Def.-Appellant United States 14 (citing Fuji, 394 F.3d 1368, 1371


(Fed. Cir. 2005), aff ’g, 249 F. Supp. 2d 434 (D.N.J. 2003)). The prin-ciples governing permissible repair, as elucidated by the Court of Ap-peals in Jazz I, did not require such findings of fact. The govern-ment’s reliance on Fuji was similarly misguided, failing to observethat the district court in Fuji cautioned against semantic distinc-tions of the very type advanced by the government on appeal. See249 F. Supp. 2d at 445–46. Based on the principles governing per-missible repair as established in Jazz I, the district court in Fujistated that ‘‘[w]hether these refurbishment procedures are countedas four, eight or nineteen ‘steps’ is a matter of semantics, as virtuallyany step can be divided into multiple ‘sub-steps.’ The legal issue iswhether the totality of the refurbishment procedures are of such anature that they preserve the useful life of the patented article, orwhether they in fact recreate the article after it has become spent.’’Id. at 446–47. In Jazz III, the Court of Appeals, after reiterating theprinciples governing permissible repair and prohibited reconstruc-tion that it had explained and applied in Jazz I, stated that ‘‘[w]hilethere is no bright-line test for determining whether a device hasbeen permissibly repaired, it does not turn on minor details.’’Jazz III, 439 F.3d at 1354. ‘‘Here, the court characterized the sev-enth step as various minor operations incidental to the first sixsteps. Because the first six steps did not make a new single use cam-era, it follows that minor operations which were incidental to thosesteps also did not make a new single use camera.’’ Id. (internal quo-tation marks omitted). Because the minor operations undertaken byPolytech, whether considered individually or collectively, did not con-stitute the type of process that remotely could be described as a pro-hibited reconstruction of the camera under the principles that theCourt of Appeals discussed at length in Jazz I, the government’s ap-pellate argument to the contrary in the Jazz III litigation was base-less.

Moreover, there was not a factual basis on the record in Jazz II onwhich the government could ground its appellate argument that the‘‘minor operations’’ might have included the use of patent-infringingfull width replacement backs for Kodak cameras. The record evi-dence in Jazz II on the nature of the minor operations identifiedthose minor operations so as not to include full back replacements.The court found, on the basis of testimony by plaintiff ’s witness, Mr.Zawodny, that ‘‘full back replacements . . . are not used for produc-tion of Jazz cameras intended for sale in the United States.’’ SeeJazz II, 28 CIT at , 353 F. Supp. 2d at 1346. The governmentpresented no evidence to the contrary. The court gave weight to Mr.Zawodny’s testimony, finding it both credible and probative. Id. at1344. Undeterred by the lack of any evidentiary support in therecord on appeal, the government argued that full back replace-ments may have occurred at the Polytech facility when the subjectLFFPs were refurbished. The Court of Appeals rejected the govern-


ment’s argument, observing that ‘‘[e]vidence in the record supportsthe court’s determination, demonstrating that at the time the subjectLFFPs were produced, Polytech had stopped using full back replace-ments.’’ Jazz III, 439 F.3d at 1355.

Defendant further argued on appeal that the Court of Interna-tional Trade erred in relying on the two 2003 videotapes of Polytech’sfactory, alleging that the videotapes were not relevant and that, increditing the videotapes, the court employed ‘‘novel standards.’’ Br. ofDef.-Appellant United States 26–30. Defendant contended that thosestandards departed from ‘‘the standards applied by other fora in de-ciding the permissible repair defense.’’ Reply Br. of Def.-AppellantUnited States 12. The government argued that the tapes ‘‘did noteven purport to demonstrate the actual processes used to producethe subject LFFPs’’ and argued that the Commission had, in a priorproceeding, rejected this evidence because it depicted repair ofKodak shells using half back, not full back, replacements. Br. of Def.-Appellant United States 27 (asserting that ‘‘[t]he Commission foundthis evidence to be adequate to demonstrate a permissible repairprocess only for Kodak shells using half backs, not full backs. TheCommission specifically found that this evidence was insufficient tosatisfy this Court’s requirements for a permissible repair processwith regard to Fuji, Konica, and Concord shells.’’ (citations omitted)).

The government was not substantially justified in arguing on ap-peal that the videotapes were not relevant evidence. Plaintiff offeredthe tapes to demonstrate the nature of the repair operations con-ducted at the Polytech plant in Shenzhen, China, the very plant thatproduced the LFFPs in the case. The relevance of this evidence tothe permissible repair issue in Jazz II was readily apparent onceplaintiff established an adequate evidentiary foundation. Mr.Zawodny, in testifying regarding the steps of the permissible repairprocess depicted in the videotapes at issue, stated that the opera-tions depicted in the videotapes were still being performed duringthe summer of 2004 when the imported LFFPs were produced in thePolytech Shenzhen factory. He addressed in his testimony the repairof the various brands of LFFPs. The Commission’s rejection of theevidence, in a different proceeding, on the ground that it was con-fined to repair of Kodak shells using half back replacements did notsupport the exclusion of the videotape evidence for the narrow pur-pose for which it was offered at trial in Jazz II.

The court also finds no rational basis for defendant’s appellate ar-gument that in crediting the videotapes, the court employed novelstandards that departed from the standards applied by other fora indeciding the permissible repair defense. For the reasons discussedabove, there was no basis in law under which defendant plausiblycould contend that the permissible repair standard as applied by thecourt in Jazz II departed from that established in Jazz I. Nor wasthat standard inconsistent with the standard applied by the district


court in Fuji, which, as noted previously, was a standard not pre-mised on semantic distinctions. The courts that have considered theLFFP permissible repair issue have based their decisions, properly,on whether the particular processes employed constituted permis-sible repair or prohibited reconstruction, declining to draw meaning-less or trivial distinctions from the descriptions of the various stepsor sub-steps.

3. Defendant’s Appellate Argument on the Segregation of LFFPsWas Not Substantially Justified

Before the Court of Appeals, defendant argued that the Court ofInternational Trade erred in Jazz II by issuing the November 5,2004 Order for Expedited Administrative Determination. That orderdirected Customs to conduct a physical examination of the merchan-dise in the two shipments in the presence of plaintiff ’s representa-tives and ordered Customs, in effect, to report to the court onwhether the packaging and labeling of the imported LFFPs affordeda means of identifying the merchandise in Master Lot Number 463,the master lot number pertaining to the LFFPs made from SevenBuck’s shells. Claiming that ‘‘[u]nprecedented’’ and ‘‘burdensome’’ ad-ministrative responsibilities had been improperly imposed uponCustoms, the United States argued to the Court of Appeals that theCourt of International Trade should have sustained Customs’ exclu-sion based on the holding that the LFFPs resulting from SevenBuck’s shells were inadmissible but, instead, ‘‘improperly orderedCustoms to assist Jazz in identifying the inadmissible merchandiseand segregating it from merchandise deemed to be admissible.’’ Br.of Def.-Appellant United States 53, 55. The government on appealargued, further, that ‘‘the trial court impermissibly usurped the roleand discretion of Customs by ordering Customs to supervise Jazzwhile it segregated the merchandise that the court held to be prop-erly excluded from that it deemed admissible. The trial court ex-ceeded its authority by directing Customs to assist in the segrega-tion and in ordering release of the goods, without taking into accountthe many elements that Customs might have considered, such asthose in [19 C.F.R. § 141.52], as well as the other statutes and regu-lations in place that dictate the release and entry of merchandise.’’Id. at 56. In reference to those ‘‘other statutes and regulations,’’ de-fendant’s brief clarified that ‘‘[f]or example, Jazz could have filed awarehouse entry pursuant to 19 C.F.R. § 144.1, withdrawn its en-tries for exportation pursuant to 19 C.F.R. § 144.37, and then re-imported that merchandise which the court found to be incorrectlyexcluded. Or, alternatively, Jazz could have availed itself of the For-eign Trade Zone Acts [sic], 19 U.S.C. § 81a, to deal with its merchan-dise.’’ Id. at 57.

The appellate argument that the government directed to thecourt’s order on segregation was pointless. Defendant’s brief to the


Court of Appeals fails to explain how directing Customs to partici-pate in the brief proceeding commenced by the Order for ExpeditedAdministrative Determination was beyond the authority of theCourt of International Trade. The government’s arguments are in-consistent with the scope of judicial authority granted by 28 U.S.C.§ 2643(b), which statutory provision was expressly cited in thecourt’s order. As Congress provided in 28 U.S.C. § 2643(b), ‘‘[i]f theCourt of International Trade is unable to determine the correct deci-sion on the basis of the evidence presented in any civil action, thecourt may order a retrial or rehearing for all purposes, or may ordersuch further administrative or adjudicative procedures as the courtconsiders necessary to enable it to reach the correct decision.’’ At thetime of issuing the Order for Expedited Administrative Determina-tion, the court lacked a factual record on which it could decide thequestion of whether the merchandise in Master Lot Number 463could be segregated, in whole or in part, from the remainder of themerchandise in the two shipments. The answer to that question re-quired only an examination of the packaging and labeling of the twoshipments and a comparison to Jazz’s business records pertaining toMaster Lot Number 463. The court’s resort to its authority under 28U.S.C. § 2643(b) allowed an expeditious resolution of this straight-forward factual question.

The court finds no substantial justification for the government’sargument that Customs was impermissibly burdened by having tocomply with the court’s order. The government’s briefs fail to cite arule or principle under which the routine obligations imposed onCustoms by the court’s order could be adjudged contrary to law. Fol-lowing the issuance of the order, defendant raised no objection in theJazz II litigation directed to the burden on Customs. As the Court ofAppeals concluded in Jazz III, the burden of establishing that theadmissible merchandise could be segregated from the inadmissiblemerchandise fell upon Jazz, not Customs, as reflected in the judg-ment entered in Jazz II. See Jazz III, 439 F.3d at 1356.

Finally, the government’s appellate argument concerning bondedwarehouse and foreign trade zone procedures was misguided and ir-relevant to the question of the court’s authority to order an adminis-trative proceeding and to reopen the record to resolve a factual issueaffecting the judgment the court was preparing to enter. See Br. ofDef.-Appellant United States 55–57. The implication of the govern-ment’s argument is that because bonded warehouse and foreigntrade zone procedures exist under the tariff laws, the court was re-quired to force Jazz to resort to one of these procedures rather thanresolve the segregation issue directly through the expedited admin-istrative proceeding. The government cited no law or principle thatwould support such a novel contention, which if adopted by the courtcould have delayed the proceedings unnecessarily. The government’sargument appeared to regard the exclusion of Jazz’s merchandise by


Customs, at least in some respects, as final. Such was not the case.The legality of the exclusion of all of the merchandise was the veryissue under consideration by the court in Jazz II. That issue had notbeen resolved at the time the court issued the Order for ExpeditedAdministrative Determination, at which time judgment had not yetbeen entered.

In summary, during the appellate phase of the litigation neitherthe position advocated by defendant on the permissible repair issuenor the position it advanced on the segregation issue was substan-tially justified. Plaintiff, and the Court of Appeals as well, were bur-dened unnecessarily by issues that the government should not haveraised.

B. The Government’s Position at the Administrative Level WasSubstantially Justified

Under the applicable scope and standard of review, the court didnot consider the actions of Customs at the administrative level dur-ing the Jazz II litigation. See Jazz II, 28 CIT at , 353 F. Supp.2d at 1333 (citing 28 U.S.C. § 2640(a)(1)); see also ITT Corp. v.United States, 24 F.3d 1384, 1388–89 (Fed. Cir. 1994) (interpreting§ 2640(a) to require a court to make its own findings of fact ratherthan rely on the facts on the agency record). Under de novo review,the court does not examine the reasonableness of Customs’ conductbut instead presumes that the factual determinations made by Cus-toms are correct. See 28 U.S.C. §§ 2639(a)(1), 2640(a)(1).

Plaintiff does not request an EAJA award for the attorneys’ feesand other expenses incurred during the proceedings before Customs.Nonetheless, because the denial of the protest by Customs causedplaintiff to be put through the expense of commencing and maintain-ing the litigation in Jazz II, the court considers whether the admin-istrative position taken by Customs leading to the Jazz II litigationwas substantially justified. See, e.g., ICI Worldwide, Inc. v. UnitedStates, 14 CIT 201, 202 (1990) (stating that ‘‘[b]ecause Customs’sconduct in denying the protests was unjustified, the fees and ex-penses of this action are to be awarded even though defendant ad-mitted liability in its answer to the complaint herein. Defendant’sreasonable litigation conduct does not change the agency’s prior con-duct. Plaintiff should not have been put to the expense of commenc-ing a lawsuit.’’). In this case, the court concludes that the actions byCustoms in excluding the two shipments of LFFPs and denying theprotest had a reasonable basis in fact and law.

In its EAJA application, plaintiff argues that at the administrativelevel, Customs never inspected its merchandise, initially excludedits merchandise based upon administrative requirements ‘‘adoptedin contravention of Administrative Procedure Act (APA) rulemak-ing,’’ and, even after rescinding these requirements, declined to re-lease plaintiff ’s goods. Pl.’s Application 8. However, Jazz did not


present Customs with conclusive evidence establishing that theLFFPs were outside the scope of the Commission’s Exclusion Order.As part of its protest submission, Jazz provided Customs with ‘‘docu-mentary and video evidence of the ‘repair and alteration’ processesperformed at various Chinese plants engaged in the permissible re-pair of the cameras’’; the determination of the administrative lawjudge in a Section 337 enforcement proceeding, In the Matter of Cer-tain Lens-Fitted Film Packages, Inv. No. 337–TA–406, EnforcementProceedings (II) (June 18, 2004), which concluded that the repairprocess at the Polytech facility constituted ‘‘permissible repair’’; andan affirmation by the Chief Executive Officer of Jazz. See Mem. of P.& A. in Supp. of Protest 7–8, Exs. E, F (Sept. 26, 2004). Althoughplaintiff later introduced, during the trial in Jazz II, a substantialamount of evidence adduced from testimony, and the court relied onthis evidence in concluding that the subject cameras purchased fromPhoto Recycling qualified for admission, see Jazz II, 28 CIT at ,353 F. Supp. 2d at 1341–47, not all of that evidence was presented toCustoms during the administrative process. See Def.’s Resp. 5, 20(stating that ‘‘Jazz’s protest, and the information submitted by Jazzto Customs, consisted of legal arguments and did not include the tes-timony and documentary proof later presented to the Court’’ and fur-ther stating, in reference to Pl.’s Application, that ‘‘Jazz acknowl-edges that it did not present testimony to Customs during theadministrative protests.’’). Therefore, Customs was required to reachits position at the administrative level based on a factual record evenmore limited than the record made before the court in Jazz II. Giventhe limitations of the factual showing made at the administrativelevel, Customs was justified in then deciding that Jazz presented in-sufficient evidence to establish the admissibility of its merchandise.

The administrative position taken by Customs in excluding themerchandise from entry and denying the protest did not lack a legaljustification. At that time, the ‘‘first sale’’ requirement of the permis-sible repair defense was relatively new, with some parameters yet tobe defined by the courts. The Court of Appeals in Jazz I did notidentify every possible type of factual showing that could establishfirst sale and was not presented with a record requiring it to do so.Specific legal issues raised by the evidence Jazz produced at trial inthe Jazz II litigation later were clarified by the Court of Appeals inJazz III.

In summary, the administrative position of Customs was justifiedto a degree that could satisfy a reasonable person. See Pierce, 487U.S. at 565. Customs at that time did not press a tenuous positionwithout factual or legal foundation. See Gavette v. Office of PersonnelManagement, 808 F.2d 1456, 1467 (Fed. Cir. 1986).

C. Special Circumstances Do Not Exist to Make an Award UnjustHaving concluded that defendant United States has not demon-

strated substantial justification for its appellate positions on the per-


missible repair and segregation issues, the court considers whether,under EAJA, ‘‘special circumstances make an award unjust.’’ 28U.S.C. § 2412(d)(1)(A). The court does not find such circumstances.Where the government unsuccessfully advances novel and crediblelegal theories in good faith, or where an area of law is unsettled, thegovernment may defend its actions for EAJA purposes by allegingthe existence of special circumstances. Traveler Trading Co. v.United States, 13 CIT 380, 384, 713 F. Supp. 409, 413 (1989). ‘‘ ‘This‘safety valve’ helps to insure that the Government is not deterredfrom advancing in good faith the novel but credible extensions andinterpretations of the law that often underlie vigorous enforcementefforts. It also gives the court discretion to deny awards where equi-table considerations dictate an award should not be made.’ ’’ Devine,733 F.2d at 895–96 (quoting H.R. REP. NO. 96–1418, at 11 (1980), re-printed in 1980 U.S.C.C.A.N. 4984, 4990).

At the appellate level, the government did not advance a crediblelegal theory on the issue of permissible repair or the issue of segre-gation. Instead, despite lacking a plausible legal theory and a suit-able factual record, defendant caused plaintiff to waste resources re-sponding to its baseless appellate arguments that the resolution ofthe permissible repair issue in Jazz II was unsupported by neces-sary findings of fact and incorrect as a matter of law. Equally base-less was defendant’s appellate argument that the court lacked au-thority to order an expedited administrative proceeding to resolveissues of segregating merchandise, when such a proceeding waswithin the court’s powers granted by statute.

III. CONCLUSION AND ORDER

For the reasons discussed herein, the court concludes that the po-sitions taken by defendant in the Jazz II litigation and at the ad-ministrative level were substantially justified but that defendantwas not substantially justified in the litigation positions presented tothe Court of Appeals on the issues of permissible repair and segrega-tion of merchandise. The court further concludes that special circum-stances do not exist in this case that make an award under EAJA un-just. Accordingly, upon consideration of Plaintiff ’s Application for anAward of Attorney Fees Under the Equal Access to Justice Act, de-fendant’s response thereto, and all other submissions and proceed-ings herein, it is hereby

ORDERED that Plaintiff ’s Application for an Award of AttorneyFees Under the Equal Access to Justice Act be, and hereby is, condi-tionally GRANTED IN PART and DENIED IN PART; and it is fur-ther

ORDERED that plaintiff shall file with the Clerk of the Court, byAugust 31, 2007, a revised confidential application statement pre-pared in accordance with this Opinion and Order that identifies the


specific legal services rendered in litigating before the Court of Ap-peals the issue of whether the Court of International Trade erred inholding that processing conducted on Jazz’s imported merchandiseconstituted permissible repair and the issue of the authority of theCourt of International Trade to order an expedited administrativeproceeding directed to the segregation of merchandise, and any ex-penses incurred in connection with the performance of such servicesfor which plaintiff seeks reimbursement.

�

Slip Op. 07–110

MITTAL STEEL GALATI S.A., FORMERLY KNOWN AS ISPAT SIDEX S.A.,Plaintiff, v. UNITED STATES, Defendant, IPSCO STEEL., INC.Defendant-Intervenor.

BEFORE: Pogue, JudgeCourt No. 05–00311PUBLIC VERSION

[Commerce’s determination affirmed-in-part and remanded-in-part; Plaintiff ’sMotion for Judgment on the Agency Record denied]

Decided: July 18, 2007

Arent Fox Kintner Plotkin & Kahn (John M. Gurley, Nancy A. Noonan) for Plaintiff.Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson, Director, Patricia

M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S.Department of Justice (David F. D’Allessandris, Trial Attorney) for Defendant.

Schagrin Associates (Roger B. Schagrin) for Defendant-Intervenor.

OPINION

Pogue, Judge: In this action, Plaintiff Mittal Steel Galati, S.A.(‘‘Mittal’’ or ‘‘Plaintiff ’’) seeks judicial review of the final results ofthe 2002–2003 administrative review, conducted by the UnitedStates Commerce Department (‘‘the Department’’ or ‘‘Commerce’’), ofthe antidumping duty order on cut-to-length carbon steel plate fromRomania. See Certain Cut-to-Length Carbon Steel Plate from Roma-nia, 70 Fed. Reg. 12,651 (Dep’t Commerce March 15, 2005) (final re-sults and final partial rescission) (‘‘Final Results’’).

Mittal challenges three of Commerce’s data selection decisions, allcontained in the Final Results. Specifically, Mittal protests: (1) Com-merce’s decision to value Plaintiff ’s recycled iron scrap factor as amaterial input, instead of assigning it a value of zero or providing anappropriate offset to the assigned value; (2) Commerce’s choice of asurrogate value for limestone; and (3) Commerce’s rejection of data –to be used in deriving surrogate financial ratios – from the financial


statements for Mittal’s Algerian affiliate, Ispat Annaba. Mittal alsoasks the court to order the re-liquidation of subject merchandise en-tries that were liquidated prior to the expiration of the statutorytime limit for appeal, and prior to Mittal’s application for a prelimi-nary injunction.

Pending before the court is Plaintiff ’s USCIT R. 56.2 motion forjudgment on the agency record. For the reasons stated herein, thecourt remands for reconsideration Commerce’s decision to valuePlaintiff ’s recycled iron scrap factor and its choice of a surrogatevalue for limestone. The court affirms Commerce’s rejection of the fi-nancial statement from Ispat Annaba. Further, the court declines toexercise its authority to order re-liquidation.

Background

Mittal Steel Galati, S.A., formerly known as Ispat Sidex S.A., isthe producer of certain cut-to-length carbon steel plates in Romania.These products are covered by an antidumping duty order that wasissued in 1993. See Certain Cut-to-Length Carbon Steel Plate fromRomania, 58 Fed. Reg. 44,167 (Dep’t Commerce Aug. 19, 1993) (anti-dumping duty order). Commerce conducted an administrative reviewof this antidumping duty order for entries during the period fromAugust 1, 2002 to July 31, 2003 (the ‘‘period of review’’ or ‘‘POR’’). SeeCertain Cut-to-Length Carbon Steel Plate from Romania, 69 Fed.Reg. 54,108 (Dep’t Commerce Sept. 7, 2004)(preliminary results andnotice of intent to rescind in part) (‘‘Preliminary Results’’); see alsoFinal Results, 70 Fed. Reg. 12,651.1

It is a fundamental premise of antidumping law that, in establish-ing an antidumping duty rate (whether prospectively, as the initialcash deposit rate set during an initial antidumping investigation, oras a result of the retrospective assessment conducted during the ad-ministrative review), Commerce is charged by Section 731 of the Tar-iff Act of 1930, as amended, 19 U.S.C. § 1673 (2000)2 with determin-ing the difference between the ‘‘normal value’’ of the subjectmerchandise and the ‘‘export price’’ or the ‘‘constructed export price,’’which is the price at which the subject merchandise is sold in the

1 The antidumping duty order establishes an estimate of the antidumping duty rate (the‘‘cash deposit’’ rate) that will be assessed on the goods covered by the order at the time ofentry. See Decca Hospitality Furnishing LLC. v. United States, 30 CIT , , 427 F.Supp. 2d 1249, 1251 (2006). As the United States antidumping duty regime is a retrospec-tive system, the administrative review establishes the actual antidumping duty rate. See 19CFR § 351.212 (2006) (‘‘Unlike the systems of some other countries, the United States usesa ‘retrospective’ assessment system under which final liability for antidumping andcountervailing duties is determined after merchandise is imported.’’); see also Am. Signa-ture Inc. v. United States, 31 CIT , 477 F. Supp. 2d 1281, 1282 (2007).

2 Further citations to the Tariff Act of 1930 are to the relevant provision in Title 19 of theU.S. Code, 2000 edition.


United States market. See Dorbest Ltd. v. United States, 30CIT , , 462 F. Supp. 2d 1262, 1265 n.1 (2006).

For market economy countries, the ‘‘normal value’’ is the ‘‘price ofthe foreign merchandise in its country of origin, in an appropriatethird country, or the foreign product’s cost of production.’’ Id.; see 19U.S.C. § 1677b(a). In the case of non-market economy countries(‘‘NME’s’’), due to the fact that the market does not operate based onmarket-determined prices or the intersection of supply and demand,the cost of the goods cannot be based upon the prices attributed tothem by the selling companies. Dorbest 30 CIT at , 462 F. Supp.2d at 1265 n. 1; see also Magnesium Corp. of Am. v. United States,166 F. 3d 1364, 1368 (Fed. Cir. 1999) (‘‘[T]he prices of the goods pro-duced in an NME are subject to discrepancies which distort theirvalue.’’) (quoting Magnesium Corp. of Am. v. United States, 20 CIT1092, 1095, 938 F. Supp. 885, 890 (1996). As a result, Commerce con-structs the ‘‘normal value’’ of goods from an NME by assigning avalue to the inputs of the goods, based on the ‘‘factors of production,’’and extrapolating the ‘‘normal’’ value based on that information.3

The value assigned to the inputs of the goods is known as a ‘‘surro-gate value’’ and is generally determined by identifying the cost of in-puts in a comparable market economy country. See 19 U.S.C.§ 1677b(c); Dorbest, 30 CIT at , 462 F. Supp. 2d at 1265 n.1. Incalculating these costs, the Statute generally requires that Com-merce seek to determine an accurate dumping margin. See Dorbest,30 CIT at , 462 F. Supp 2d. at 1268 (‘‘The term ‘best available’ isone of comparison, i.e., the statute requires Commerce to select, fromthe information before it, the best data for calculating an accuratedumping margin.’’); see also Lasko Metal Prods., Inc. v. UnitedStates, 43 F. 3d 1442, 1443 (Fed. Cir. 1994). To this end, in makingits data choices, Commerce normally considers the quality, specific-

3 See Dorbest, 30 CIT at , 462 F. Supp. 2d at 1265 n.1 (‘‘the antidumping statute au-thorizes Commerce to approximate normal value based on the cost of producing the foreignmerchandise (with a margin of profit factored in).’’ In particular, the statute reads:

(c) Nonmarket economy countries(1) In general

If(A) the subject merchandise is exported from a nonmarket economy country, and(B) the administering authority finds that available information does not permit thenormal value of the subject merchandise to be determined under subsection (a) ofthis section,

the administering authority shall determine the normal value of the subject merchan-dise on the basis of the value of the factors of production utilized in producing the mer-chandise and to which shall be added an amount for general expenses and profit plus thecost of containers, coverings, and other expenses. Except as provided in paragraph (2),the valuation of the factors of production shall be based on the best available informationregarding the values of such factors in a market economy country or countries consideredto be appropriate by the administering authority.

19 U.S.C. § 1677b(c).


ity and contemporaneity of the data and prefers to use public,country-wide data, where it is available. See Goldlink Indus. Co. v.United States, 30 CIT , , 431 F. Supp. 2d 1323, 1337 (2006);Freshwater Crawfish Tail Meat from the People’s Republic of China,66 Fed. Reg. 20,634 (Dep’t Commerce Apr. 24, 2001) (final resultsand final partial rescission), Issues and Decision Mem. (cmt. 2).

Halfway through the period of review, in the administrative re-view at issue here, Commerce changed Romania’s status from a non-market to a market economy country, effective January 1, 2003.Def.’s Mem. in Opp’n to Pl.’s Mot. for J. Upon the Agency R. 3 (‘‘Def.’sBr.’’). As a result Commerce determined that, for the purposes of thisadministrative review, it would treat Romania as an NME for the pe-riod from August 1 to December 31, 2003, and as a market economycountry from January 1 to July 31, 2003. Id.; see Preliminary Re-sults, 69 Fed. Reg. at 54,108–109. Therefore, Commerce calculated anormal value using surrogate values, in addition to using the statu-tory market economy analysis. Mittal’s challenges relate to Com-merce’s data choices in the calculation of the normal value for theportion of the POR for which Romania was considered by Commerceto be an NME. The court has jurisdiction over the action pursuant to28 U.S.C. § 1581(c).

Standard of Review

When reviewing Commerce’s final determination in an adminis-trative review under 19 U.S.C. § 1516a, the court upholds Com-merce’s determinations, findings, or conclusions when they are sup-ported by substantial evidence on the record, and otherwise inaccordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). Specifically, thecourt reviews the agency’s legal interpretation of the governing stat-utes—whether or not issued by formal notice-and-comment rule-making—to confirm that such interpretation is in accordance withlaw. See, e.g., Chevron U.S.A. Inc. v. Natural Resources DefenseCouncil Inc., 467 U.S. 837, 842–43 (1984); Zenith Elec. Corp. v.United States, 988 F. 2d 1573, 1582 (Fed. Cir. 1993); cf. Christensenv. Harris County, 529 U.S. 576, 587(2000) (citing Skidmore v. Swift& Co., 323 U.S. 134, 140 (1944). The agency’s factual determinationsare reviewed to determine whether there is substantial evidence inthe record supporting the agency’s findings. Ta Chen Stainless SteelPipe, Inc. v. United States, 298 F. 3d 1330, 1335 (Fed. Cir. 2002) Sub-stantial evidence review requires weighing the totality of the evi-dence, id.,4 to determine whether the agency’s factual findings are

4 ‘‘To determine if substantial evidence exists, we review the record as a whole, includingevidence that supports as well as evidence that ‘fairly detracts from the substantiality ofthe evidence.’ ’’ Ta Chen Stainless Steel Pipe, 298 F. 3d at 1335 (quoting Atl. Sugar, Ltd. v.United States, 744 F. 2d 1556, 1562 (Fed. Cir. 1984)).


reasonable when viewed in light of that complete record. NipponSteel Corp. v. United States, 458 F. 3d 1345, 1351 (Fed. Cir. 2006).

Analysis

1. Assignment of a Surrogate Value to Mittal’s Recycled Iron ScrapInput

As noted above, in calculating a normal value for goods from anNME country, Commerce assigns a surrogate value to the various in-puts that are used to manufacture the subject merchandise coveredby the antidumping duty order. Dorbest, 30 CIT at , 462 F.Supp. 2d at 1265 n.1; 19 U.S.C. § 1677b(c). In order to ascertain thefactors of production that were used for the subject merchandise,Commerce sends questionnaires to the exporters subject to the in-vestigation. Def.’s Br. 3. After a verification process, Commerce thenselects an appropriate surrogate value for the goods. Id. at 3–5.

In some investigations, the remnants or by-products of one part ofthe production process (the cost of which is already accounted for)are re-utilized in a secondary production process. To re-value thesere-cycled inputs in evaluating the costs of the secondary productioncould result in counting the cost of that factor of production twice.Therefore, as a general rule, when Commerce can verify that scrapwas produced from an earlier stage of the production process, andthat it is utilized in a later stage of the production process, Com-merce will value the scrap input at zero, and not assign a surrogatevalue to the scrap input. Def.’s Br. 10 (‘‘Typically, Commerce does notassign a surrogate value to recycled products because the factorsused in producing the recycled by-products have already been re-ported.’’).

This general rule appears applicable to Mittal, which is a fully in-tegrated steel mill that manufactures the subject merchandise fromstart to finish (that is to say from the production of coke to the pro-duction of liquid steel and then the rolling of steel slabs into the sub-ject merchandise). Pl.’s Reply to Def.’s & Def.-Intervenor’s Mem. inOpp’n to Pl.’s Mot. J. Agency R. 2–3 (‘‘Pl.’s Reply’’). As a result, in thisadministrative review, Mittal reported the factors of production usedfor each stage of the production process. Id. In its response to Com-merce’s questionnaire regarding Mittal’s factors of production, Mittal‘‘requested Commerce not to value the recycled iron scrap as the fac-tors of production for such scrap are already part of the integratedfactors reported.’’ Pl’s Mem. of P. & A. in Supp. of its R. 56.2 Mot. J.Agency R. 7 (‘‘Pl.’s Br.’’) 7. Mittal’s response stated:

In this field we have reported the consumption of self-producedscrap which re-entered the production process, per 1 MT ofheavy plate. Scrap is introduced in the refractory and steelworks plant to produce liquid steel. No surrogate value shouldbe applied to this factor as the factors needed to produce the re-


cycled scrap are already reported.

Pl.’s Br. 7 (quoting Letter from Coudert Brothers LLP to the U.S. De-partment of Commerce, Case No. A–485–803 Re: Certain Cut-to-Length Steel Plate from Romania (December 22, 2003), Prop. Doc.No. 569, Pl.’s App. 4 (‘‘Section D Questionnaire Response’’) at 11.

In its Issues and Decision Memorandum for the Final Results ofthe Administrative Review (‘‘Issues and Decision Mem.’’), 5 Com-merce announced its contrary decision to assign a value to Mittal’siron scrap product. Commerce explained:

In this case, [Mittal] did not request a scrap offset, supply ad-equate documentation for the recycled scrap, or provide a rea-sonable alternative methodology to account for these inputs.The burden is on the respondent to create an adequate recordto substantiate its claim for an offset. . . . [Mittal] has not metits burden and has not provided any evidence on the record tosupport its claim for an offset.

Issues and Decision Mem., at 27 (Cmt. 12).Mittal argues that by assigning a value to Mittal’s scrap input,

Commerce double-counts the cost of those inputs, valuing them afirst time when they initially entered the production process, andthen valuing them a second time when they were used as scrap prod-uct in a latter portion of the production process. Mittal claims thatby double-counting the cost of these inputs, Commerce runs afoul ofstatutory and court strictures that require Commerce to calculatethe antidumping margin as accurately as possible. See Lasko, 43 F.3d at 1443.

Mittal argues that, while it is true that they did not request an off-set for its iron scrap product whether the scrap input is valued at‘‘zero’’ or is instead added in as a factor of production, with thatvalue then ‘‘offset’’, the result is the same, i.e., ultimately the scrapinput is not valued. Pl.’s Br. 10. Mittal also argues that it has previ-ously reported its scrap input in the same way in Commerce’s inves-tigations of similar products, covering in part the same time period,without requesting a scrap offset, and Commerce did not assign asurrogate value to Mittal’s scrap input. Id. As an example, Mittalpoints to Certain Hot-Rolled Carbon Steel Flat Products from Roma-nia, and the first administrative review thereof (conducted for 2002–2003). Pl.’s Br. 12; see Certain Hot-Rolled Carbon Steel Flat Productsfrom Romania, 66 Fed. Reg. 49,628 (Dep’t Commerce Sept. 28, 2001)(final determination); Certain Hot-Rolled Carbon Steel Flat Products

5 Memorandum from Barbara E. Tillman to Joseph A. Spetrini, Issues and DecisionMemorandum for the Final Results and Final Partial Recission of Certain Cut-to-LengthCarbon Steel Plate from Romania, Dep’t Commerce (March 17, 2005), available at http://ia.ita.doc.gov/frn/0503frn/E5–1127.txt.


From Romania, 70 Fed. Reg. 34,448 (Dep’t Commerce June 14,2005)(final results).

In the proceedings for hot-rolled carbon flat steel products fromRomania, the second review of which overlaps the same time periodas the proceeding under review here, Mittal claims that recycled ironscrap was valued at zero, and, as is the case here, no formal requestfor an offset was made. The fact that Commerce seemingly changedits methodology, without explaining the change or inconsistency, ac-cording to Plaintiff, implicates a reliance interest that companieshave in a past methodology. Pl.’s Br. 14; see Bowe-Passat v. UnitedStates, 17 CIT 335, 339 (1993); Fujian Mach. & Equip. Imp. & Exp.Corp. v. United States, 25 CIT 1150, 1169, 178 F. Supp. 2d 1305,1327 (2001); Shikoku Chems. Corp. v. United States, 16 CIT 382,388, 795 F. Supp. 417, 421 (1992) (‘‘[p]rinciples of fairness preventCommerce from changing its methodology at this late stage’’).

Mittal also argues that it had no opportunity to comply with anynew policy that would have required it to formally request an offset,stating that Commerce’s questionnaire does not include a require-ment to request such a ‘‘scrap offset.’’ Pl.’s Br. 12. Plaintiff claimsthat when Commerce instituted its new methodology, Plaintiffshould have had the opportunity to ‘‘address the new methodologywhich Commerce adopted in the Final Results.’’ Id. at 14.

Finally, Mittal argues that, despite Commerce’s assertions to thecontrary, it did provide sufficient documentation to account for theamount of input used at specific stages of the production process. Inparticular, Mittal points to its Section D questionnaire response andits first supplemental questionnaire response, in which Mittal statedthat it reported all of the factors of production that go into the pro-duction of the subject merchandise and the recovered iron scrap.Pl.’s Br. 15; Section D Questionnaire Response, Prop. Doc. No. 569,Pl.’s App. 4 at 11; Letter from Coudert Brothers LLP to the U.S. De-partment of Commerce, Case No. A–485–803 Re: Certain Cut-to-Length Steel Plate from Romania (February 11, 2004), Prop. Doc. No.611, Pl.’s App. 5 at 11, Ex. 17 (‘‘First Supplemental Questionnaire Re-sponse’’). Mittal also provided additional information to explain ‘‘anapparent discrepancy between the recycled iron scrap factors of pro-duction reported and the total scrap produced.’’ Pl.’s Br. at 16. SeeLetter from the Coudert Brothers LLP to the U.S. Department ofCommerce, Case No. A–485–803 (May 17, 2004), Prop. Doc. No. 634,Pl.’s App. 14 (‘‘Second Supplemental Questionnaire Response’’) at 6–7and at Exs. 13–14.

While Commerce concedes that it ‘‘[t]ypically [ ] does not assign asurrogate value to recycled products because the factors used in pro-ducing the recycled by-products have already been reported,’’ Def.’sBr. 10, it argues that its decision in this review to assign a surrogatevalue to the scrap input here is supported by the record.


Commerce specifically claims that during the administrative re-view ‘‘Mittal Steel failed to demonstrate the amount of recycledscrap it actually produced and consumed during the production ofsubject merchandise.’’ Id. at 14. Commerce states that Mittal onlyprovided estimates of the amount of iron scrap reintroduced into theproduction process, did not provide any calculations of the amount ofiron scrap, did not allocate the amount of scrap used in the produc-tion of subject versus non-subject merchandise, and never providedan actual amount of recycled iron scrap used in production. Id. at14–15 (citing First Supplemental Questionnaire Response, Prop. Doc.No. 611, Pl. App. 5. Exs. 17, 18; Second Supplemental QuestionnaireResponse, Prop. Doc. No. 634, Pl.’s App. 14 at 6–7 and Ex. 13–14).Additionally, Commerce points to the fact that Mittal also purchasediron scrap. Def.’s Br. 15 (citing Section D Questionnaire Response,Prop. Doc. No. 569, Pl.’s App. 4 at 10–11.

Commerce also responds that Mittal’s claim – that there is suffi-cient information on the record for Commerce to calculate theamount of recycled scrap used – is unavailing because, even wereCommerce able to calculate the amount of recycled scrap used bysubtracting the purchased scrap from the total amount of scrapused, that calculation nonetheless would not reveal how much re-cycled scrap was used or allocated between subject and non-subjectmerchandise, and therefore provides no information as to the actualamount of such recycled scrap that was consumed in the productionof the subject merchandise.6 Def.’s Br. 16.

6 Ipsco Steel, Inc., the Defendant-Intervenor, points out that ‘‘[s]crap recovered from theproduction of non-subject merchandise does not qualify for a scrap offset (even though it isrequired to be reported as an input if used in producing the subject merchandise) becausethe inputs used in producing this recycled scrap (i.e. the inputs used to produce the non-subject merchandise from which this recycled scrap was generated) are not reported in re-sponse to Commerce’s questionnaire.’’ Opp’n of Def.-Intervenor Ipsco Steel Inc. to Pl.’s Mem.in Supp. of its R. 56.2 Mot. J. Agency R. 8 (‘‘Def.-Intervenor’s Br.’’) (emphasis in original).The Defendant-Intervenor also notes the similarity of this situation to that of Non-Malleable Cast Iron Pipe Fittings from the PRC, where Commerce could not properly ascer-tain the source of the scrap used. Commerce did not, however, make this argument or expla-nation in the Issues and Decision Mem., in which it claimed that Mittal ‘‘did not . . . supplyadequate documentation for the recycled scrap.’’ Issues and Decision Mem. at 27 (cmt 12).

Defendant states, in its brief, that ‘‘Mittal Steel failed to demonstrate the amount of re-cycled scrap it actually produced and consumed during the production of the subject mer-chandise.’’ Def.’s Br. 14 (emphasis added). Other than this statement, however, Defendantappears to be basing its argument on the lack of actual figures for the consumption of re-cycled iron scrap in the production of subject merchandise rather than recycled iron scrapproduced during the production of subject merchandise.

In fact, Commerce claims several times in its brief that Mittal did not provide theamount of iron scrap consumed in the production of subject merchandise. Def.’s Br. 14 (‘‘Spe-cifically, Mittal Steel failed to demonstrate the amount of scrap it actually consumed andfailed to allocate its recycled scrap over both its subject and non-subject merchandise.’’); seealso id. at 11, 15, 16.

Mittal claims, in its Reply Brief, that ‘‘the reported self-produced iron scrap factor of pro-duction already accounts for the production of subject merchandise and not the universe ofproducts made by [Mittal].’’ Pl.’s Reply Br. 8. Mittal further claims that ‘‘in order to account


Commerce further claims that the administrative determinationsthat Mittal cites addressing the use of the same or similar methodol-ogy, in which Commerce did not assign a surrogate value to the re-cycled scrap product, are of no moment. Commerce contends that thecourt is foreclosed from considering the methodologies adopted inother determinations because the record data in those cases are noton the record as part of the underlying administrative proceeding atissue here. Commerce concedes that Appendix 7, which is the FactorValuation Memorandum for Certain Hot-Rolled Steel Flat Productsfrom Romania, can be considered part of the record here, but arguesthat that determination is not relevant as it only indicates that in areview for a different product, recycled scrap was not valued. Def.’sBr. 12. Commerce claims that Mittal’s reliance on proceedings inother reviews for other products is equally unavailing, as none of thedeterminations to which Mittal points are for the same order. Def.’sBr. 13.7

Mittal counters this argument by the Defendant-Intervenor by as-serting that it has reported the scrap product at the same level ofspecificity as all of the other materials reported. Pl.’s Reply Br. 3. Ad-ditionally, Mittal claims it calculated the contribution of recyclediron scrap to the subject merchandise, saying that the worksheetsprovided demonstrated the allocations of scrap in the production ofsubject merchandise. Mittal states that it ‘‘provided both the stage-specific input consumption and the cumulative input consumptionover all of the stages of the production process for the subject mer-chandise.’’ Pl.’s Reply Br. 8. It then adjusted the recycled scrap by theyields of the slab caster and the plate mills, utilizing ‘‘the same re-porting methodology applied to all material inputs in this proceed-ing.’’ Id.

Finally, Mittal notes that in Certain Hot-Rolled Carbon Steel FlatProducts from Romania, Commerce valued recycled iron scrap atzero both in its investigation and in the first administrative review.Mittal claims that the integrated production processes for hot-rolledsteel and steel plate are identical until the liquid steel stage (at

for the liquid steel used only in the production of subject merchandise, [Mittal] adjusted therecycled scrap FOP by the yields and production of the slab caster and the plate mills.’’ Id.

The court notes that there is nothing on the record that indicates that Commerce wasquestioning the production of the recycled iron scrap rather than its usage. Consequently, itappears that the Defendant-Intervenor’s argument about the production of recycled scrap isa red herring.

7 Defendant-Intervenor also notes that there is no change in practice at all here, statingthat it has long been the policy of Commerce to ascertain what portion of the scrap utilizedis generated by the production of the subject merchandise (versus production of the non-subject merchandise). Def.-Intervenor’s Br. 13–14. Defendant-Intervenor claims that anydifference in treatment alleged by Mittal is based on a factual difference, i.e., that in caseswhere the offset is given, Commerce is able to ascertain what percentage of recycled scrap isgenerated from the subject merchandise as opposed to the non-subject merchandise, orwhere the respondent produces only the subject merchandise. Id.


which point the difference lies in the finishing of the products). Mit-tal argues that even though hot-rolled steel is not covered by thesame order, it is so like the goods at issue here that Commerce’streatment of the recycled scrap input here is a departure from itsprevious methodology. Pl.s Br. 11–12.

The court finds it is necessary to remand this issue to Commerce.The agency’s policy is that ‘‘Commerce will offset the respondent’scost of production by the value of a reported by-product where the re-spondent’s questionnaire responses indicate that it was sold, orwhere the record evidence demonstrates clearly that the by-productwas re-entered into the production process.’’ Def.’s Br. 11. Here, Com-merce’s decision not to follow its own policy is unsupported by sub-stantial evidence; nor did Commerce ‘‘articulate[ ] a rational connec-tion between the facts found and the choices made.’’ Celanese Chems.Ltd. v. United States, 31 CIT , , Slip Op. 07–16 at 38 (Janu-ary 29, 2007) (citing Burlington Truck Lines, Inc. v. United States,371 U.S. 156, 168 (1962)).

Construed generously, Commerce’s determination gives the follow-ing reasons for providing a value to the recycled scrap: (1) Mittalnever requested a scrap offset; (2) Mittal did not provide the actualamount of scrap used in manufacturing the subject merchandise; (3)there was no means of distinguishing between recycled and pur-chased scrap inputs; and (4) there was no means of distinguishingbetween recycled scrap that had been used in the production of sub-ject merchandise as opposed to the production of non-subject mer-chandise.

As for the first point, it appears that Mittal would not have knownto request such an offset based on its experience in other 8 investiga-tions and reviews. More importantly, nowhere in the questionnairesMittal received (which it received prior to the issuance of the Pre-liminary Results) was there any indication that Mittal was requiredto ask for an offset in order for the recycled scrap not to receive avalue.

8 See Memorandum from Christopher Riker to Gary Tavermen Re: Preliminary Determi-nation of Sales at Less than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products fromRomania, Dept’ Commerce (April 23, 2001), Prop. Doc. 735 at Ex. 10, Pl.’s App. 7 at 2 (show-ing that recycled iron scrap for the same producer for a product with a similar productionprocess was not valued). Commerce argues before the court that the court should not takeinto account the Final Factors Valuation Memo in the 2002–2003 Administrative Review ofCertain Hot-Rolled Carbon Steel Flat Products from Romania, (Dep’t Commerce June 6,2005) or from the Preliminary Factors Valuation Memo. in the 2002–2003 AdministrativeReview of Certain Hot-Rolled Carbon Steel Flat Products from Romania, (Dep’t CommerceNov. 29, 2004), as these were not part of the record of the proceeding. The court notes thatthese are all documents that are part of the public record, involving the same parties and asimilar product, and would be of relevance in deciding whether or not Commerce had a dif-ferent prior past practice. However, the court need not consider the documents that werenot part of the administrative record of this proceeding in order to decide this issue.


As for Commerce’s remaining points, the evidence on the recorddemonstrates the contrary. Specifically, the evidence on the recorddemonstrates that Mittal provided specific usage calculations for re-cycled scrap product on a per Metric Ton basis.9 This informationwas provided for the subject merchandise produced. Mittal provideda worksheet that indicated the consumption, by kilogram per metricton, for the various inputs used to calculate the subject merchandise.See Second Supplemental Questionnaire Response, Prop. Doc. No.634, Pl.’s App. 14 at Ex. 14. This table provides a break-out used forIron Scrap Recycled and Iron Scrap Purchased used in the manufac-ture of subject merchandise. Commerce’s decision is therefore incon-sistent with the record. To say that Mittal’s table does not ‘‘docu-ment’’ the recycled scrap entering into the production of subjectmerchandise, or that this submission is not an appropriate allocationmethodology, is therefore to say that none of the factors of produc-tion reported by Mittal were allocated properly between subject andnon-subject merchandise. But Commerce makes no such claim. Onthe contrary, Commerce accepted Mittal’s filings for other factors.See Memorandum from Ann Barnett-Dahl and Brandon Farlander,Case Analysts, to Richard Weible, Office Director, Office VII Re: Pre-liminary Results of Review: Certain Cut-to-Length Carbon SteelPlate from Romania; Factors of Production Valuation Memorandumfor the Preliminary Results, (Dep’t Commerce Aug. 30, 2004), Prop.Doc. No. 698, Pl.’s App. 3 at Attach. 1 (‘‘Factors Valuation Mem.’’).Thus Commerce relies on the fact that Mittal did not provide datathat was, in fact, on the record. Consequently, Commerce’s determi-nation not to value the recycled iron scrap as zero is not supportedby substantial evidence. On remand, Commerce must review Mittal’sfilings and address specifically their sufficiency for making the re-quired calculations.

9 In responding to the questionnaire, Mittal stated:

Exhibit 17 of [Mittal’s] February 10, 2004 supplemental response contained (a) the step-by-step detailed explanation of how [Mittal] derived the recycled scrap FOP (the Re-cycled Iron Scrap FOP Worksheet) and (b) a worksheet with monthly scrap consumptionsfor each of BOF1 and BOF3. A revised version of Exhibit 17 of [Mittal’s] February 10,2004, supplemental response, containing minor corrections, is attached at Exhibit 13 ofthis response.

See also id. at Ex. 13,(‘‘The specific consumption of recycled iron scrap at BOF1 for the pro-duction of 1 MT of liquid steel was derived as follows . . . ’’). Defendant-Intervenor contendsthat while Mittal reported factor data based on only inputs that entered the blast furnacesthat produced the subject inputs, the scrap was recovered from multiple sources includingthe finishing of non-subject merchandise. Def. Intervenor’s Br. 11. Mittal refutes this pointby stating that it uses the same means of reporting recycled iron scrap as any other input,by adjusting the recycled scrap factor of production by ‘‘the yields and production of the slabcaster and the plate mills’’ in order to calculate the contribution of recycled iron scrap tosubject merchandise. Pl.’s Reply Br. 8. Mittal further explained that ‘‘[t]he reporting of all ofthe material inputs that went into the production of steel slab, including the recycled ironscrap, was adjusted to reflect only the slab corresponding to the cost groups used to manu-facture the subject merchandise.’’ Id. at 3–4.


2. Commerce’s choice of Surrogate Value for Limestone

When choosing surrogate values during an investigation or admin-istrative review, Commerce selects a country that, to the extent prac-ticable, will be the source of data to value the individual factors ofproduction. See 19 U.S.C. § 1677b(c)(1)&(4); 19 C.F.R.§ 351.408(c)(1) & (2)10 ; see also Dorbest, 30 CIT at , 462 F.Supp. 2d at 1270. For this administrative review, Commerce deter-mined that ‘‘Egypt, Algeria, and the Philippines (1) are comparableto Romania in its level of economic development, and (2) are signifi-cant producers of comparable merchandise’’ and therefore would beacceptable surrogate countries. Preliminary Results, 69 Fed. Reg. at54,113. From those countries, Commerce then chose Egypt as its sur-rogate country for this investigation.11 Id. For valuing limestone,however, Commerce calculated a surrogate value using import datafrom the Philippines from 2001.

After the issuance of the Preliminary Results and prior to the issu-ance of the Final Results, Mittal argued that Commerce’s selection ofFilipino import data was not appropriate because the data was aber-rational. Mittal argued that Commerce should instead use Mittal’sown 2003 purchase price, from the latter half of the Period of Re-view, during which Commerce classified Romania as a marketeconomy country, as a surrogate value for limestone.

In the Issues and Decision Mem., Commerce declined to change itssurrogate value for limestone,12 stating that if could not use Mittal’sown information, as that information was proprietary and thereforedid not meet the criteria that Commerce has established for select-ing surrogate values. Issues and Decision Mem. at 26 (cmt 11). Com-merce further stated, with respect to aberrational data, that it

examined, where applicable, 2002 data from the countries onthe surrogate country list and [Commerce was] unable to finddata that was not aberrational. [Commerce] repeated this pro-cess for 2001 data and [Commerce] found the 2001 Philippineslimestone data to be non-aberrational.

Issues and Decision Mem., at 24 (cmt 11).Before the court, Mittal again challenges the selection of the Fili-

pino import data stating that the selection of this surrogate valuecontravenes the statutory directive that Commerce is to ‘‘value thefactors of production ‘based on the best available information regard-ing the values of such factors in a market economy country or coun-

10 All references to the Code of Federal Regulations are to the 2006 edition.11 No party challenges this choice.12 Commerce selected 2001 Filipino import data that valued limestone at $0.07/kg. Fac-

tors Valuation Mem. at 4. With adjustments for inflation and converted to Metric Tons(‘‘MT’’), this is equivalent to an adjusted price per MT of $77.45. Id.


tries considered to be appropriate by [Commerce].’ ’’ Pl.’s Br. 24 (cit-ing 19 U.S.C. § 1677b(c)(1)(B)(2000)). Mittal avers that there isother non-aberrational data on the record that satisfies the statutoryobjective of being the ‘‘best available information.’’ Mittal also claimsthat the choice of Filipino data is not supported by substantial evi-dence due to the fact that the Filipino data selected is aberrational.

Mittal supports its assertion that the Filipino limestone data isaberrational by pointing to (1) the fact that the data selected isbased on very low import volumes (contrary to Commerce’s preferredpractice),13,14 and (2) the data selected is ten times higher than thebenchmark data provided on the record. Pl.’s Br. 25.

The chart below demonstrates the range of prices for limestonethat Plaintiff has placed on the record for the POR:

Limestone Import Prices in dollars per kg(for POR unless otherwise noted)

Commerce’sselection(2001)

U.S.Data15

E.U. data ElSalvadordata

Polishdata

Albaniandata

Peak actualprice (half ofPOR)

0.07 0.006 �0.015 0.054 0.007 0.02 [ ]16

Pl.’s Br. 26; see also Pl.’s Case Br., Prop. Doc. No. 735, Pl.’s App. 12 at55–56; Letter from the Coudert Brothers LLP to the U.S. Depart-

13 Specifically, Plaintiff points to the fact that the 2001 data from the Philippines wasbased on import data with a value of $6000. Letter from Coudert Brothers LLP to the U.S.Department of Commerce, Case No. A–485–803 Re: Certain Cut-to-Length Steel Plate fromRomania (October 18, 2004), Prop. Doc. No. 735, Pl.’s App. 12 at 54 (‘‘Pl.’s Case Br.’’) (citingFactors Valuation Mem. at 4)). Additionally, Plaintiff claims that this import data was basedon imports from the United States. Id.

14 Plaintiff cites to several of Commerce’s previous investigations of other products,where Commerce rejected surrogate data which are based on low levels of imports. In par-ticular, Plaintiff references Steel Concrete Reinforcing Bars from Belarus 66 Fed. Reg.33,528 (Dep’t Commerce June 22, 2001) (final determination) (Issues and Decision Memo-randum at 4 (cmt. 1) available at http://ia.ita.doc.gov/frn/summary/belarus/01–15743–1.txt(rejecting a surrogate value, Commerce states that it ‘‘[does] not believe that a value thatdiffers significantly from both the Thai and U.S. values for the same input and is based onimport data primarily from one country, and in relatively low quantities, is a representativeor reliable value to use as a surrogate value in [Commerce’s] calculations’’); Silicon Metalfrom the Russian Federation, 68 Fed. Reg. 6885 (Dep’t Commerce Feb. 11, 2003) (final de-termination) (Issues and Decision Memorandum at 20 (cmt. 5)) available at http://ia.ita.doc.gov/frn/summary/russia/03–3408–1.pdf (excluding low volume imports when theper unit values were substantially different than the per unit values of the larger quantitiesof the import on the record). See Pl.’s Case Brief, Prop. Doc. No. 735, Pl.’s App. 12 at 54.

15 In its Brief before the court, and in its case brief before Commerce, Plaintiff listed theU.S. import price for limestone data as $0.006/MT. Pl.’s Br. 26; Pl.’s Case Br., Prop. Doc. No.735, Pl.’s App. 12 at 55. A further examination of the record, however, reveals that the cor-rect unit of measurement is $0.006/kg. Letter from Coudert Brothers LLP to the U.S. De-partment of Commerce, Case No. A–485–803 Re: Certain Cut-to-Length Steel Plate from Ro-mania (August 3, 2004) Pl.’s App. 18 at Ex.3.

16 This is Plaintiff ’s proprietary data. It is substantially less than Commerce’s selection.


ment of Commerce, Case No. A–485–803 (October 8, 2004), Prop.Doc. No. 733, Pl.’s App. 14 at Ex. 4.17

Mittal also notes that Commerce’s choice of data from the Philip-pines is contrary to case law directing that Commerce ‘‘be consistentin applying benchmark variations to determine which values are ab-errational.’’ Pl.s’ Br. 28 (citing Hebei Metals & Minerals Imp. & Exp.Corp. v. United States, 29 CIT , , Slip Op. 04–88 at 21–22(July 19, 2004). More specifically, Mittal notes that, in the instantadministrative review before the court, Commerce itself declined touse Algerian data that was based on imports worth $7,720, and hav-ing a value ten times other surrogate data on the record for the sameinput. Pl.’s Br. 28; see Issues and Decision Mem. at 14–15 (cmt. 6).

In response to Mittal’s challenges to the Filipino data selected,Commerce explained that its procedures led to the selection of Egyptas Commerce’s primary surrogate country, and therefore as its pri-mary choice for surrogate data. When data from Egypt was unavail-able or unusable, Commerce sought data from other economicallycomparable countries that were also significant producers of compa-rable merchandise—here the Philippines and Algeria-in its searchfor appropriate surrogate value information. Commerce claims thatit chose the Filipino data because

the 2002 data from the WTA [World Trade Atlas] were aberra-tional or non-existent for Egypt, the Philippines, and Algeria,as were the 2001 data from Egypt and Algeria. Commercefound that these import prices were unreasonably high priced,except for the 2001 Filipino data.

Def.’s Br. 18 (citing Factors Valuation Mem., Prop. Doc. No. 698, Pl.’sApp. 3 at 4).

While, Commerce ‘‘agree[s] that ‘aberrational’ surrogate input val-ues should be disregarded’’18 and that its practice is ‘‘to disregardsmall-quantity import data when the per-unit value is substantiallydifferent from the per-unit values of the larger quantity imports ofthat product from other countries,’’19 Commerce argues that it ad-justed the Filipino import data to account for any aberrations. Def.’sBr. 20. Of all the available limestone data from all the surrogate

17 Plaintiff hypothesizes that the high value of the Filipino import data is based on thelow volume of that data, the fact that the imports came from the United States, and the factthat the category used to select the imports was a basket category of goods, and thereforewas not specific enough to obtain the particular limestone input utilized by Mittal. Pl.’s Br.27–28.

18 Def.’s Br. 19 (quoting Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27296,27366 (Dep’t Commerce May 19, 1997)(final rule).

19 Def.’s Br. 19 (quoting Heavy Forged Hand Tools from the People’s Republic of China, 62Fed. Reg. 11,813 (Dep’t Commerce March 13, 1997) (final results); citing Shakeproof Assem-bly Components Div. of Illinois Tool Works, Inc. v. United States, 23 CIT 479,485, 59 F.Supp. 2d 1354, 1360 (1999).


countries, Commerce argues that the Filipino import data was themost reasonable choice, warts and all, within the universe of choices.

The court remands this issue to Commerce for further explanationin light of the data placed on the record that demonstrates that thelimestone value that Commerce selected was much higher than thevalue of limestone imported in other countries and applied to a smallvolume of imports. See Shakeproof Assembly, 23 CIT at 485, 59 F.Supp. 2d at 1359–60; see also Shanghai Foreign Trade Enters. v.United States, 28 CIT , , 318 F. Supp 2d 1339, 1353 (2004)Hebei Metals & Minerals, 28 CIT at , Slip Op. 04–88 at 21–22.

In the cases cited above, Commerce excluded import statisticswhere the import value was aberrational and the import values low,and when alternative import statistics included imports from severalcountries. In this administrative review, as noted above, Commerceexcluded data from Algeria based on this principle. Pl.’s Br. 29; Is-sues and Decision Mem. at 14–15 (cmt 6).20

When confronted with a colorable claim that the data that Com-merce is considering is aberrational, Commerce must examine thedata and provide a reasoned explanation as to why the data itchooses is reliable and non-distortive. See Dorbest, 30 CIT at ,462 F. Supp. 2d at 1287–88. Here, confronted with data that indi-cates that Commerce chose low volume, aberrational data, Com-merce did not evaluate the data on the record in comparison tobenchmarks, but instead relied only on the claim that the data se-lected was better than other data from the acceptable surrogatecountries. As such, Commerce’s decision skips over Mittal’s claimthat the Filipino data is outside Commerce’s own standard of accept-ability, and thus avoids an important aspect of the problem pre-sented. Motor Vehicle Mfrs. Assn. v. State Farm Mut., 463 U.S. 29, 43(1983) (agency action is arbitrary and capricious where it fails toconsider an important aspect of the problem).

Commerce effectively claims that it chose the Filipino import datadue to a process of elimination. While Commerce argues that this isits best choice within its universe of choices, Commerce has not ex-plained, why, given the benchmark data (which is plentiful and re-markably consistent), it found the 2001 Filipino import data to be re-liable and non-aberrational. If the Filipino data which meetsCommerce’s surrogate criteria nonetheless proves to be unusable, ordemonstrably aberrational, Commerce should examine data sourcesthat it has outside of those from the surrogate countries. Cf. Dorbest,30 CIT at , 462 F. Supp 2d at 1280–81 (noting that Commerce’sdesire for contemporaneity might be trumped if data that is non-contemporaneous is otherwise accurate).

20 Even in using the Filipino data, Commerce made adjustments, eliminating data fromSpain, because Commerce found that data to be aberrational. Factor Valuation Memo.,Prop. Doc. No. 698, Pl.’s App. 3 at 4.


On this record, Mittal has provided several options for surrogatevalues for limestone. Commerce has rejected the U.S. and the EUdata because Commerce’s practice is ‘‘ ‘to only resort to data fromcountries not on the surrogate country list’ such as the United Statesand the European Union, where Commerce ‘cannot identify surro-gate value data from any country on the surrogate country list thatis a significant producer of comparable merchandise.’ ’’ Def.’s Br. 20(quoting the Issues and Decision Mem., 26 (cmt. 11)). While Com-merce has every right to prefer data from economically comparablecountries, Commerce cannot meet its statutory objective to use thebest available information, or to obtain the most accurate marginpossible, by relying on aberrational data for the sole reason that itcomes from a country that is on the surrogate country list. See GlobeMetallurgical, Inc. v. United States, 28 CIT , 350 F. Supp. 2d1148, 1160 (2004)(‘‘Commerce will disregard values from the primarysurrogate country when it finds those values to be (1) unavailable;(2) not sufficiently contemporaneous; (3) of poor quality, or (4) other-wise unreliable, i.e., aberrational.’’ (internal citation omitted) ). AsCommerce itself recognizes, it does not use surrogate country datathat is aberrational. Id.; Antidumping Duties; Countervailing Duties,62 Fed. Reg. at 27366; Shakeproof Assembly, 23 CIT at 485, 59 F.Supp. 2d at 1359–60.

In addition, Commerce’s analysis of its alternatives is incomplete.Commerce declined to use Mittal’s own data on the basis that thisdata consists of proprietary information. Def.’s Br. 21; Issues and De-cision Mem., at 26 (cmt. 11). But the argument against using propri-etary information does not apply when it is the respondent’s own in-formation that is at issue. Commerce is using the respondent’sproprietary information throughout its investigation or review, whenrelying on the respondent’s reporting of factors of production. In-deed, Commerce’s own regulations provide for the usage of respon-dent’s own information in a non-market economy situation, when afactor is purchased from a market-economy supplier. 19 C.F.R.§ 351.408(c)(1).21 Accordingly, Commerce should reconsider this ra-tionale.

Commerce also claims that it cannot use the Mittal data becausethat data is outside the period of review. However, the Filipino datais also outside the period of review, though adjusted. Consequently,Commerce appears to apply its standards in an arbitrary fashion.See Shanghai Foreign Trade Enters., 28 CIT at , 318 F. Supp. 2d

21 Commerce’s regulation reads:

(1) Information used to value factors. The Secretary normally will use publicly availableinformation to value factors. However, where a factor is purchased from a marketeconomy supplier and paid for in a market economy currency, the Secretary normallywill use the price paid to the market economy supplier. . . .

19 C.F.R. § 351.408(c)(1).


at 1352 (Commerce’s determination was not supported by substan-tial evidence when ‘‘Commerce summarily discarded the alternativesas flawed but did not evaluate the reliability of its own choice.’’). Thefact that Commerce was willing to rely on Filipino data that wereoutside the period of review indicates that data from outside the pe-riod of review is not automatically disqualified.

Finally, Commerce relies on its preference for ‘‘country-wide, pub-licly available data.’’ Def.’s Br. 21–22. Invoking this general policypreference, however, does not appear to be logical here. It is of coursereasonable that Commerce establish conditions and criteria in orderto help ensure that it has accurate and reliable data. It confoundsthe issue, however, if Commerce rejects a company’s own actualprice paid, during a period when that country is considered part of amarket economy country, on the basis that the price is non-representative of the entire country.

Commerce’s task is to duplicate, to the best of its ability, the pricesa company would pay for its inputs were that company functioningin a market economy country. 19 U.S.C. § 1677b(c). When Com-merce accepts the value of the subject merchandise as the normalvalue in a market economy country,22 it implicitly accepts the pricepaid for the inputs as accurate and the true price paid by the respon-dent. It therefore appears irrational to accept that these values arethe true prices paid by a company on the one hand, and then to si-multaneously reject them because they are not publicly available in-formation that is country-wide. Therefore, this issue is remanded.On remand, Commerce shall reconsider its position in light of thebenchmark data on the record.

3. Commerce’s Rejection of Ispat Annaba Financial Statements todetermine SG&A ratios

When Commerce is constructing the normal value for a respon-dent in a non-market economy country, Commerce must also takeinto account those costs that are not covered by the factors of produc-tion (the physical inputs and the wages of the workers directly in-volved in the manufacturing process). ‘‘Because firms have ‘generalexpenses and profits’ not traceable to a specific product, in order tocapture these expenses and profits, Commerce must factor (1) fac-tory overhead (‘overhead’), (2) selling, general and administrative ex-penses (‘SG&A’), and (3) profit into the calculation of normal value.’’Dorbest, 30 CIT at , 462 F. Supp. 2d at 1300; see 19 U.S.C.

22 See Preliminary Results, 69 Fed. Reg. at 54,115 (after determining that the amount ofsales in Romania were sufficient to base the value on Romanian sales, Commerce ‘‘basedthe determination of [Normal Value] upon the [Home Market] sales of the foreign like prod-uct. Thus, [Commerce] used as [Normal Value] the prices at which the foreign like productwas first sold for consumption in Romania, in the usual commercial quantities, in the ordi-nary course of trade, and, to the extent possible, at the same level of trade (LOT) as the [Ex-port Price] or [Constructed Export Price] sales, as appropriate. . . . ’’).


§ 1677b(c)(1). In order to capture these costs, Commerce relies uponfinancial statements from one or more companies based in the pri-mary surrogate country (or other surrogate countries if need be) tocreate financial ratios that Commerce then applies to its factors forproduction data in order to recreate the full expenses of the respon-dent. Dorbest, 30 CIT at , 462 F. Supp. 2d at 1300–1.

In the Preliminary Results, Commerce selected Egyptian Iron andSteel (‘‘EIS’’) as its surrogate producer. After the publication of thePreliminary Results, Mittal challenged Commerce’s choice of the fi-nancial statements from Egyptian Iron and Steel (‘‘EIS’’) to calculatethe SG&A ratios, and argued that instead Commerce should use thefinancial statement for an Algerian company (a Mittal Steel affili-ate), Ispat Annaba. Mittal argued that Ispat Annaba’s financialstatement met Commerce’s own criteria for a surrogate producer be-cause it is ‘‘reliable, contemporaneous with the POR, contains a de-tailed break-out of expense categories, earned a profit, and operatesunder common management principles.’’ Issues and Decision Mem.,at 17 (cmt. 10).

Mittal also identified a range of problems with EIS’s data, andstated that if Commerce chose to continue to use Egyptian surrogatedata, the agency should use data from another Egyptian company,Alexandria National Iron and Steel (‘‘AIS’’). Id. at 20 (cmt. 10). Addi-tionally, Commerce had initially supplemented EIS’s financial state-ments with those from three different sources. Mittal claimed that ifCommerce insisted on supplementing the data from EIS or AIS withthose of companies from non-surrogate countries, they should usemanufacturers based in Indonesia, and suggested the financialstatement of PT Jaya Pari Steel Tbk (‘‘Jaya Pari’’). Id. at 22 (cmt.10).

Commerce selected the financial statement from AIS, but alsosupplemented AIS’ data with those of Jaya Pari, in order to calculatenon-depreciation overhead. Issues and Decision Mem., at 22–24 (cmt.10). Commerce declined to used the financial statement from IspatAnnaba stating that:

[b]ecause [Mittal] is affiliated with Ispat Annaba, the Depart-ment determines that there is a potential conflict in that IspatAnnaba’s financial statement is more likely to be manipulatedand is therefore less preferable than non-affiliated companies’financial statements. In contrast, while AIS is not an inte-grated steel producer, like [Mittal] (or Ispat Annaba), it is notaffiliated with [Mittal] and is an Egyptian producer of compa-rable merchandise.

Id. at 23 (internal citations omitted).Mittal challenges Commerce’s rejection of the financial statements

from Ispat Annaba, claiming that Commerce’s decision was not sup-ported by any data on the record, that affiliation is not a statutory


test to qualify or disqualify producers, and finally, that the financialdata from Ispat Annaba represents the best surrogate value data onrecord. Pl.’s Br. 30.

To support its claim that there is insufficient evidence on therecord of data manipulation, Mittal cites case law indicating thatCommerce’s data choice must be based on record evidence and not onspeculation. See Anshan Iron & Steel Co. v. United States, 28CIT , , 358 F. Supp.2d 1236, 1241 n.2 (2004) (quotingAsociacion Colombiana de Exportadores de Flores v. United States,13 CIT 13, 15, 704 F. Supp. 1114, 1117, (1989) (‘‘Speculation is notsupport for a finding. . . . ’’) ).

Mittal also points to instances in which affiliated companies wereused to determine surrogate financial ratios in an antidumping in-vestigation or administrative review involving an NME. See CertainBall Bearings and Parts Thereof From the People’s Republic ofChina, 68 Fed. Reg. 10,685 (Dep’t Commerce Mar. 6, 2003) (final de-termination) (Issues and Decision Mem. at 18–22 (cmt. 1H) availableat http://ia.ita.doc.gov/frn/summary/prc/03–5300–1.pdf.23

Finally, Mittal argues that the data from Ispat Annaba is the bestavailable as it is from one of the countries from Commerce’s surro-gate country list (Algeria), contemporaneous with the POR, audited,publicly available, and from producers that manufacture similarmerchandise. While these characteristics also describe AIS, Mittalargues that Ispat Annaba is the superior data source because the fi-nancial statements from Ispat Annaba provide a break-out of non-depreciation overhead items, and Ispat Annaba is at the same levelof integration as Mittal (whereas AIS is not). Mittal notes that inprevious investigations or reviews, Commerce has viewed the levelof integration to be a relevant factor for consideration because ‘‘anintegrated producer will likely have greater overhead (particularlydepreciation expense) because of its more expensive equipment. . . . ’’Pl.s’ Br. 35, (quoting Ball Bearings and Parts Thereof From the Peo-ple’s Republic of China, 68 Fed. Reg. 10,685(Issues and DecisionMem. at 15 (cmt. 1F) ).24

Commerce admits that AIS is not a fully integrated steel producer.Def.’s Br. 24. See also Issues and Decision Mem. at 23 (Cmt. 10). Italso notes that it had to supplement AIS’ information with a non-

23 In the cited case, the financial statements were prepared after the petition was filed,and respondents chose which financial statements to place on the record. Commerce usedthe data because there was no evidence of ‘‘any accounting irregularities or improper ad-justments.’’ Certain Ball Bearings and Parts Thereof From the People’s Republic of China,68 Fed. Reg. 10,685(Issues and Decision Mem. at 18–22) (cmt.1H) ).

24 Defendant-Intervenor points out that following the logic of Plaintiff ’s argument herewould lead to an implication ‘‘that the AIS statements understate manufacturing overheadbecause AIS is less integrated than [Mittal].’’ Def.-Intervenor’s Br. at 27 (emphasis in theoriginal). Therefore, ‘‘it does not logically follow that Commerce overstated factory overheadby selecting AIS’s financial data over that of Ispat Annaba.’’ Id.


depreciation overhead financial ratio taken from Jaya Pari’s finan-cial statement. Def.’s Br. 23. Commerce states, however, that the in-formation from Ispat Annaba also had to be supplemented.

Commerce notes that, in this administrative review, the agencywas faced with a choice between a manufacturer that was not fullyintegrated,25 and one that was fully integrated but affiliated. Com-merce has previously stated its preference for information that is notprovided by affiliates of interested parties in the proceeding. Def.’sBr. 25; see Certain Cased Pencils from the People’s Republic of China,67 Fed. Reg. 48,612 (Dep’t Commerce July 25, 2002) (final resultsand partial rescission) (Issues and Decision Mem. at 13 (cmt. 4) )available at http://ia.ita.doc.gov/frn/summary/prc/02–18856–1.pdf;see also Kaiyuan Group Corp. v. United States, 28 CIT , ,343 F. Supp. 2d 1289, 1314 (2004) (affirming Commerce’s determina-tion not to utilize surrogate values placed on the record by a partyaffiliate).

Regarding Mittal’s claim that there was no evidence of accountingirregularities in the Ispat Annaba data, and that Commerce has ac-cepted affiliate data in the past,26 Commerce notes that the financialstatements provided by Ispat Annaba did not include a cost break-out. In order for the financial statements to be of use in this investi-gation, Mittal obtained cost break-out information from Ispat An-naba’s accountant, and did so solely for use in this administrativereview. Def.’s Br. 25–26; Letter from the Coudert Brothers LLP to theU.S. Department of Commerce, Case No. A–485–803 (May 17, 2004),Pub. Doc. No. 128, Def.’s App. Tab 10 at 5–6. Commerce viewed thisextra information, obtained solely for this proceeding and apparentlynot prepared in the ordinary course of business, to qualify as an ‘‘ac-counting irregularity.’’

25 Defendant-Intervenor notes that while AIS is not a fully-integrated producer, it does‘‘engage[ ] in substantial manufacturing processes involved in producing the subject steelplate.’’ Def.-Intervenor’s Br. 26. Commerce noted in its Issues and Decision Mem. that:

AIS has a direct reduction plant for producing direct reduced iron and produces steel inelectric arc furnaces. See Iron and Steel Works of the World, 15th edition(2002). However,AIS is not an integrated steel producer because it does not produce pig iron in a blastfurnace or steel in a basic oxygen furnace.

Issues and Decision Mem. at 23 (cmt. 10).26 Defendant-Intervenor also notes that in the case referenced by Mittal as standing for

the proposition that affiliate data can be used to determine surrogate values, Ball Bearings,‘‘Commerce was able to corroborate the financial statements from affiliated parties with fi-nancial statements from unaffiliated parties.’’ Def.-Intervenor’s Brief 24 (citing Certain Hot-Rolled Carbon Steel Flat Products from Romania, 70 Fed. Reg. 34,448 (Dep’t CommerceJune 14, 2005) (final determination) (Issues and Decision Mem. at 38–39 (cmt. 7) ) availableat http://ia.ita.doc.gov/frn/summary/romania/E5–3067–1.pdf. Therefore, the data in thatcase was not solely from affiliated companies, nor was additional break-out data needed; ac-cordingly, the case is not analogous to the case here.


Therefore, Commerce maintains, it was reasonable to choose thenon-fully-integrated producer over the data provided by Mittal’s af-filiate.

The Court affirms Commerce’s decision not to use Ispat Annaba’sfinancial statements in calculating surrogate financial ratios.Commerce had a choice between two imperfect financial statements.It was within the agency’s statutory authority to choose to usenon-affiliated data when some of the information provided wasobtained specifically for this proceeding, and was therefore producedin circumstances providing a significant opportunity for data-manipulation.

While Mittal correctly argues that there is no statutory require-ment that the data come from non-affiliated companies, it does notargue, nor can it, that Commerce does not have the discretion to de-termine that it does not want to use affiliated data when such datahas ‘‘accounting irregularities.’’

Mittal argues that Commerce here is engaged in mere speculation,and as such, Commerce’s determination cannot be deemed to be sup-ported by substantial evidence. In this case, however, Commerce hasmore than a mere conjecture. Ispat Annaba’s financial statementswere not complete; in order for them to be completed, additional in-formation had to be specifically compiled, outside of the ordinarycourse of business, and Commerce could not ascertain that fromwhere the data was derived. Moreover, Commerce did have an alter-nate source of data which it deemed more reliable under the circum-stances.

Where Commerce is confronted with two alternatives(both ofwhich have their good and bad qualities), and Commerce has a pre-ferred alternative, the court will not second-guess Commerce’schoice. See Luoyang Bearing Factory v. United States, 27 CIT 1638,1644, 288 F. Supp. 2d 1369, 1375 (2003); Dorbest, 30 CIT at ,462 F. Supp. 2d 1289–90; see also Goldlink Indus. Co. v. UnitedStates, 30 CIT , , 431 F. Supp. 2d 1323, 1327 (2006) (‘‘TheCourt’s role in the case at bar is not to evaluate whether the infor-mation Commerce used was the best available, but rather whether areasonable mind could conclude that Commerce chose the best avail-able information.’’) (citation omitted). Here, a reasonable mind couldconclude that Commerce chose the best available information in se-lecting between the two choices in front of it. As such, Commerce’sdecision was supported by substantial evidence.

4. Commerce’s Adoption and Application of a 15 Day LiquidationInstruction Policy

Commerce completes its administrative review of antidumpingduty orders by publishing its final results in the Federal Register.These results include notice that liquidation instructions will be is-sued to Customs within 15 days of publication (Commerce’s ‘‘15 DayPolicy’’). Commerce’s 15 Day Policy states:


The Department of Commerce announces that, effective imme-diately, it intends to issue liquidation instructions pursuant toadministrative reviews conducted under section 751 of the Tar-iff Act of 1930, as amended, [19 U.S.C. § 1675] to the U.S. Cus-toms Service within 15 daysof publication of the final results ofreview in the Federal Register or any amendments thereto.This announcement applies to reviews conducted under sec-tions 751(a)(1) and (2) of the Tariff Act.

Int’l Trade Comm’n, Dep’t of Commerce, Announcement ConcerningIssuance of Liquidation Instructions Reflecting Results of Adminis-trative Reviews (August 9, 2002), available at http://ia.ita.doc.gov/download/liquidation-announcement.html.

The relevant provisions in 19 U.S.C. § 1675 require, at subpara-graph (a) (3)(C), that the ‘‘administering authority,’’ in this caseCommerce, ‘‘issue [liquidation] instructions to the Customs Ser-vice . . . , ’’ and, at (a)(3)(B), that ‘‘any liquidation . . . pursuant to areview . . . shall be made promptly and, to the greatest extent practi-cable, within 90 days after the instructions to Customs are issued.’’19 U.S.C. § 1675(a)(3)(B)&(C). The statutory provisions do not ex-plicitly indicate how or when the liquidation instructions should betransmitted from Commerce to Customs; accordingly, there is astatutory gap that the agency must fill. See Mittal Steel Galati S.A.v. United States, 31 CIT , Slip Op. 2007–73 at 14 (May 14,2007).

At the same time, the statute provides that in order to appeal froman administrative review to the United States Court of InternationalTrade, a party has thirty days to file ‘‘a summons, and within thirtydays thereafter a complaint.’’ 19 U.S.C. § 1516a(a)(2)(A)(ii). Rule56.2 of the United States Court of International Trade allows an-other thirty days after the service of the complaint during which theparty may file a motion for a preliminary injunction to enjoin liqui-dation of the subject entries during the process of judicial review.USCIT R. 56.2.

In the matter in dispute here, Commerce notified the Plaintiff,through publication in the Federal Register, that it intended to issueliquidation instructions for Plaintiff ’s entries within 15 days afterpublication of the Final Results. Final Results, 70 Fed. Reg. at12,653. Thereafter, Commerce actually issued the liquidation in-structions 23 days after publication of the Final Results. Liquidationof some of Mittal’s subject entries occurred 22 days after the instruc-tions issued, or 45 days after publication of the Final Results.

Mittal challenges Commerce’s 15 Day Policy, arguing that thePolicy undermines its right of judicial review, citing the 90–day pe-riod initiated by 19 U.S.C. § 1516a(a)(2)(A)(i)(I). Mittal also cites thecourt’s decision in Tianjin Machinery Import & Export Corp. v.United States for the proposition that the 15 Day Policy directly con-travenes the statutory framework established in 19 U.S.C.


§ 1516a(a)(2)(A)(i)(I). Tianjin Mach. Imp. & Exp. Corp. v. UnitedStates, 28 CIT , 353 F. Supp. 2d 1294 (2004). Effectively, Mittalclaims that its option to appeal Commerce’s decision should con-strain Commerce’s choice of a time period for issuing liquidation in-structions to Customs. But see Mukand Int’l, Ltd. v. United States,30 CIT , , 452 F. Supp. 2d 1329, 1334–35 (2006) (findingthat the 15 Day Policy was a reasonable and acceptable means ofstatutory gap-filling); see also Mittal Steel Galati, 31 CIT at ,Slip Op. 2007–73 at 14.

Mittal claims injury because liquidations are effectively final. SeeUnited States v. Utex Int’l Inc., 857 F.2d 1408, 1409–1410 (1988).Mittal notes that the injunction against liquidation in this mattertook effect after several entries had been liquidated, and that thoseliquidations occurred while Mittal was negotiating with counsel forthe Defendant the terms of the injunction. Mittal argues that deci-sions of the Federal Circuit indicate that a party should not sufferinjury from premature liquidations when it has exercised its rightsin a timely manner. See Mukand Int’l, Ltd. v. United States, No. 06–1259, 2007 WL 571026 (Fed. Cir. Feb. 6, 2007) (comparing the plain-tiff ’s untimely actions with timely actions of the plaintiff in Shinyei);see also Shinyei Corp. of Am. v. United States, 355 F. 3d 1297 (Fed.Cir. 2004).

Commerce claims that it has a statutory obligation to order liqui-dation instructions unless enjoined from doing so. 19 U.S.C.§ 1675(a)(3)(B)–(C); 19 U.S.C. § 1516a(c)(1). While the statute doesnot specify a time frame for liquidation itself, unless enjoined, en-tries subject to an antidumping duty administrative review that re-main unliquidated on the six-month anniversary of the Federal Reg-ister publication date are deemed liquidated at the rate asserted atthe time of entry. Int’l Trading Co. v. United States, 412 F. 3d 1303,1313 (Fed. Cir. 2005). Accordingly, Commerce developed the 15 DayPolicy to facilitate timely liquidations.

Commerce also argues that the affected parties bear the burden ofenjoining liquidation, citing Agro Dutch Indus. Ltd. v. United States,29 CIT , 358 F. Supp. 2d 1293, 1295–96 (2005).27

Faced with these competing claims, the court must begin itsanalysis by determining the degree of deference due to Commerce’sstatutory interpretation. Timken Co. v. United States, 26 CIT 1072,1081, 240 F. Supp. 2d 1228, 1239 (2002) (‘‘In the case of statutory in-

27 Subsequent to the publication in Agro Dutch, the case was dismissed for lack of juris-diction due to the absence of unliquidated entries, and a motion for reconsideration was de-nied. Agro Dutch Indus. Ltd. v. United States, 29 CIT , Slip Op. 05–28 (Feb. 28, 2005).That judgment was reversed and remanded by the Federal Circuit in an unpublished deci-sion. Agro Dutch Indus. Ltd. v. United States, 167 Fed. Appx. 202 (2006). The Federal Cir-cuit did not address the holding in the initial Agro Dutch case, that plaintiffs are burdenedwith enjoining liquidation, and that 19 U.S.C. § 1516a(a)(2)(A)(i)(I) does not establish aminimum liquidation period.


terpretations by agencies . . . judicial review must take place withinthe confines of either Chevron or Skidmore deference.’’) Chevron def-erence should be accorded to agency actions when the statute hasfailed to speak on an issue and the agency advances an interpreta-tion through formal channels. Chevron, 467 U.S. at 842–45.

As noted above, however, in the matter at issue here, Commercedid not issue its 15 Day Policy through formal notice-and-commentrulemaking procedures. Nor did it do so in the course of the adminis-trative review or after formal briefing and deliberations. Cf. MittalSteel Galati, 31 CIT at , Slip Op. 2007–73 at 11 (‘‘In this casethough, Plaintiff challenged Commerce’s liquidation instructionpolicy during the administrative review, and Commerce squarely ad-dressed Plaintiff ’s claim in the Decision Memorandum.’’).

Instead, Commerce posted the 15 Day Policy on its website and re-stated the 15 Day Policy in final decisions published in the FederalRegister. In the months and years preceding the announcement ofthe 15 Day Policy, there was no announcement in the Federal Regis-ter stating that this policy was under consideration, or providing forthe opportunity for comment. These informal means of establishingpolicy, albeit in interpreting statutory ambiguity, do not warrantChevron deference. Cf. United States v. Mead Corp., 533 U.S. 218,234 (2001) (describing the informalities of the administrative proce-dure used in issuing Customs classification rulings such that theserulings are ‘‘best treated like interpretations contained in policystatements, agency manuals, and enforcement guidelines, . . . be-yond the Chevron pale.’’) (internal quotations omitted); U.S. SteelGroup v. United States, 25 CIT 1046, 1051, 162 F. Supp. 2d 676, 682(2001). Accordingly, the agency’s interpretations are ‘‘entitled torespect . . . but only to the extent that those interpretations have thepower to persuade.’’ Christensen v. Harris County, 529 U.S. at 587(citations omitted).

In order to assess whether Commerce’s policy is a persuasive in-terpretation of the statute, the relevant statutory framework mustbe defined. The 15 Day Policy could be a reasonable and persuasivemeans of closing the statutory gap in 19 U.S.C. § 1675(a)(3)(B)–(C)if the policy is in accordance with the statute, consistent with legis-lative intent, has been properly announced, and is based on theagency’s particular expertise. See Mead, 533 U.S. at 228 (‘‘The fairmeasure of deference to an agency administering its own statute hasbeen understood to vary with circumstances, and courts have lookedto the degree of the agency’s care, its consistency, formality, and rela-tive expertness, and to the persuasiveness of the agency’s posi-tion . . . . ’’).

While Mittal argues that the relevant statutory framework for the15 Day Policy includes both 19 U.S.C. § 1675(a)(3) and 19 U.S.C.§ 1516a(2)(A), the court in Mukand, as noted above, foundthe 15Day Policy to be a reasonable and acceptable means of statutory gap-


filling by Commerce. Mukand, 30 CIT at , 452 F. Supp. 2d at1333–34; see also Mittal Steel Galati, 31 CIT , Slip Op. 2007–73at 14. In Mukand, the court explained that 19 U.S.C. § 1675(a)(3)creates obligations for Commerce and Customs regarding the liqui-dation of entries that inform the analysis of Commerce’s 15 DayPolicy. Mukand, 30 CIT at , 452 F. Supp. 2d at 1334.

This court agrees with the statutory analysis in Mukand and Mit-tal. The scope of 19 U.S.C. § 1516a covers the actions of interestedparties, and of the courts reviewing Commerce’s completed anti-dumping administrative reviews. Thus, 19 U.S.C. § 1516a(2)(A)does not prohibit Commerce’s action, and Commerce may, but is notrequired to heed 19 U.S.C. § 1516a in interpreting 19 U.S.C.§ 1675(a)(3). Therefore, the relevant statutory framework for ana-lyzing the 15 Day Policy is 19 U.S.C. § 1675(a)(3). See Turtle IslandRestoration Network v. Evans, 284 F. 3d 1282, 1292 (Fed. Cir.2002) (declining to invoke the doctrineof in pari materia in statutoryinterpretation).

Moreover, Customs cannot liquidate promptly if Commerce doesnot issue the instructions in a timely manner. While it is on theouter boundary of reasonableness, the 15 Day Policy encouragesprompt liquidation and is therefore consistent with the statutory in-tent.

Additionally, the intent behind the antidumping statutory frame-work was to create a more transparent antidumping review proce-dure and to further the protection of parties’ rights through height-ened due process. H.R. Rep. No. 103–826(I), at 13 (1994), asreprinted in 1994 U.S.C.C.A.N. 3773, 3785. The 15 Day Policy in-creases transparency by informing affected parties of Commerce’santicipated timetable for transmitting liquidation instructions toCustoms. Commerce also aids due process through the 15 Day Policyby encouraging affected parties to exercise their rights of judicial re-view in a timely manner. See 19 U.S.C. § 1516a(2)(A). Thus, the 15Day Policy advances this legislative intent.

Commerce also announced the 15 Day Policy properly and hasconsistently provided appropriate notice of its intended application.Commerce has regularly restated the 15 Day Policy in either the‘‘Assessment’’ or ‘‘Final Results’’ published in the Federal Register. Inthe matter at issue here, Commerce gave Plaintiff explicit notice ofits intent to apply the policy. Final Results, 70 Fed. Reg. at 12,653.Moreover, Commerce’s 15 Day Policy had been in place for over twoyears at the time that Commerce announced that the 15 Day Policywould be applied to Plaintiff in this case. As such, for purposes of ad-dressing Plaintiff ’s facial challenge, it does not offend notions of ad-ministrative fairness that Plaintiff ’s goods were liquidated prior tothe combined 60–day time period for commencement of an actionprovided by section 1516a, and prior to the issuance of a preliminaryinjunction. Cf. Mukand, 30 CIT at , 452 F. Supp. 2d at 1333


(finding that, as the actual liquidation took place 75 days after thepublication of the results, plaintiffs were not harmed in their abilityto protect their interests).

Plaintiff claims that it was harmed, in this instance, because itwas in the midst of negotiating a preliminary injunction with Com-merce when the liquidation instructions were issued. Assuming thatPlaintiff ’s description is accurate, Commerce’s behavior is hardlycommendable; nonetheless, this fact does not affect the court’s analy-sis of a facial challenge to the 15 Day Policy. Mittal was aware ofCommerce’s Policy and of Commerce’s intention to apply it. Mittalhad other means to protect its interests, including applying for aTemporary Restraining Order, or applying for an injunction immedi-ately without Commerce’s consent. Cf. Mukand, Appeal Number2006–1259 (writ of mandamus not granted when parties failed toprotect their own interest through pursuit of injunctive relief).28

Finally, in adopting its 15 Day Policy, Commerce is acting in anarea in which it has substantial expertise. See Pesquera MaresAustrales Ltda. v. United States, 266 F. 3d 1372, 1379 (Fed. Cir.2001) (‘‘Antidumping investigations are complex and complicatedmatters in which Commerce has particular expertise and thus Com-merce’s determinations are entitled to deference.’’) (internal quota-tion omitted). While, as noted above, Commerce’s 15 Day Policy wasadopted informally, outside of the administrative review at issue,and is therefore not accorded Chevron deference, its action waswithin Commerce’s area of particular expertise and statutory au-thority.

Accordingly, Commerce’s 15 Day Policy advances a reasonable and– albeit not compellingly – persuasive interpretation of 19 U.S.C.§ 1675(a)(3)(B)–(C). The 15 Day Policy fills the statutory gap in amanner consistant with the statute’s language and the legislative in-tent. Commerce announced the policy adequately, and based on itsown, special expertise.

It is certainly true that a longer period – for issuance of instruc-tions and initiating liquidation by Customs – would be more indica-tive of Commerce’s consideration of all the factors and interests in-volved in the adoption of its 15 Day Policy. A 15 day policy for theissuance of instructions, with, for example, an instruction to Cus-toms that no liquidation should occur for another 15 days, would bemore persuasive and would be more likely to make unnecessary the

28 While Mittal argues for relief in the nature of an injunction directing Commerce andCustoms to reverse the liquidation of Mittal’s entries, its filings are devoid of the kind ofpresentation necessary for such relief. Cf. Canadian Lumber Trade Alliance v. UnitedStates, 30 CIT , 441 F. Supp. 2d 1259, 1263–64 (2006). Accordingly, the court need notdecide whether Commerce and Customs in this case acted ‘‘so quickly’’ by liquidating therelevant entries as ‘‘to practically foreclose’’ Mittal ‘‘from obtaining judicial review of subjectentries pursuant to 19 U.S.C. § 1516a.’’ Mittal Steel Galati, 30 CIT at , Slip Op. 07–73at 14–15.


kind of Temporary Restraining Order practice that Commerce’s cho-sen policy may engender. Nonetheless, the court cannot concludethat Commerce’s policy is unworthy of Skidmore deference. Accord-ingly, Mittal’s challenge fails and the court will not order re-liquidation.

Conclusion

For the foregoing reasons, the court affirms-in-part andremands-in-part Commerce’s determinations, and denies Plain-tiff ’s Motion for Judgment on the Agency Record. Remand resultsare due by October 1, 2007. Comments are due by October 22, 2007.Reply comments are due by November 1, 2007. SO ORDERED.


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